CIBIL score not mandatory to get loan from bank, but...: Centre's big clarification

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The Ministry of Finance has stated that a minimum CIBIL score is not required for bank loans for first-time borrowers. Speaking in the Lok Sabha during the monsoon session last week, MoS Pankaj Chaudhary reiterated the RBI's stance and stated that banks cannot reject loan applications if the credit score is less or zero for first-time applicants.

While a CIBIL score may not be mandatory for first-time borrowers, the finance ministry has still asked banks to undertake their due diligence and conduct background checks on the applicants.(Pexels/Representational)

"As part of best practices for credit institutions, Reserve Bank vide referred Master Direction dated 6.1.2025 has advised CIs that first time borrowers’ loan applications should not be rejected just because they have no credit history," said Chaudhary.

The minister further added that RBI has not prescribed a minimum credit score for loan applications.

"In a deregulated credit environment, lenders take credit decisions as per their commercial considerations based on their Board approved policies and broad regulatory guidelines and the information contained in the Credit Information Report would be one of the inputs, amongst various other inputs/factors, that lenders would consider before granting any credit facility to a prospective borrower," the MoS added further.

What is CIBIL score?

A CIBIL score refers to a three-digit number ranging from 300 to 900, which summarises a person's individual's "creditworthiness". The score is provided by the Credit Information Bureau (India) Limited (CIBIL) in India and is often used to determine the eligibility of a person for borrowing such as personal, gold, home and other bank loans.

CIBIL score not mandatory, but checks required

While a CIBIL score may not be mandatory for first-time borrowers, the finance ministry has still asked banks to undertake their due diligence and conduct background checks on the applicants. These checks would include examining credit history, past repayment history, delayed repayments, loans settled, restructured, written-off, etc.

The minister also added that Credit Information Companies can charge upto ₹100 to provide a person with their respective credit reports. Any amount higher than this will not be acceptable.

"The fee chargeable for obtaining credit score is regulated by RBI under the Credit Information Companies Regulations, 2006, which provide that a CIC may charge an amount not exceeding ₹100 for providing to an individual his own credit information. Further, vide circular dated 1.9.2016 on “Free Annual Credit Report to Individuals”, RBI has advised every CIC to provide one free full credit report including credit score in electronic format, once in a year to individuals whose credit history is available with the CIC," Chaudhary added.

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