Big Relief for First-Time Borrowers: Govt Says Loans Can't Be Denied for Lack of CIBIL Score

For the first time, India’s government has offered a major relief to individuals applying for loans without any prior credit history. The Finance Ministry has clarified that banks cannot reject a loan application solely because the applicant does not have a CIBIL score. This directive, backed by the Reserve Bank of India (RBI), is expected to benefit millions of first-time borrowers across the country.

RBI’s Directive to Banks

According to Finance Minister of State Pankaj Chaudhary, the RBI has issued guidelines to banks and credit institutions stating that loan applications from first-time borrowers cannot be rejected only on the grounds of lacking credit history.

He emphasized that dismissing an application merely due to the absence of a CIBIL score is unfair. Instead, banks must evaluate borrowers through other parameters before making a final decision.

What Is CIBIL Score?

The CIBIL score is a three-digit number ranging between 300 and 900, used by banks to assess a person’s creditworthiness. It reflects past repayment records, outstanding loans, and default history. A higher score indicates financial reliability, making it easier to get loan approvals.

This score is issued by the Credit Information Bureau (India) Limited (CIBIL) and is considered one of the most important factors in determining loan eligibility. However, for first-time borrowers, no previous credit history exists, making it impossible for them to have a score.

No Minimum Score Requirement

Responding to concerns in the Lok Sabha during the Monsoon Session, Chaudhary confirmed that the RBI has not set any minimum credit score requirement for sanctioning loans. Instead, banks are expected to rely on their board-approved internal policies and RBI’s guidelines.

This means that while CIBIL scores remain important for risk assessment, banks cannot treat them as the only deciding factor—especially in the case of new borrowers.

How Will Banks Assess First-Time Borrowers?

Even without a credit score, banks will still carry out comprehensive checks before disbursing loans. This may include:

• Evaluating the applicant’s income stability and repayment capacity.

• Reviewing their employment background or business track record.

• Checking for any existing liabilities or history of default in indirect forms.

Thus, while the RBI has removed the mandatory credit score requirement, banks will still exercise due diligence to minimize risks.

Cost of Credit Reports

The Finance Ministry also clarified the pricing structure of credit reports. Credit Information Companies (CICs) are permitted to charge up to ₹100 for a credit report. Additionally, under RBI’s 2016 guidelines, every individual is entitled to receive one free credit report per year in electronic form. This provision ensures transparency and helps individuals monitor their financial health.

Why This Move Matters

The decision comes as a big boost for young professionals, entrepreneurs, and first-time credit seekers. Many individuals applying for personal loans, home loans, or education loans for the first time often face rejection simply because they lack a borrowing history.

By making it clear that no minimum CIBIL score is required, the government has opened the doors for wider credit access, especially for those entering the financial system for the very first time.

Final Takeaway

India’s new directive ensures that lack of credit history will no longer be a barrier for loan seekers. While banks will continue to assess repayment ability through other means, first-time borrowers now have a fair chance at securing loans without being penalized for not having a CIBIL score.

This move reflects the government’s effort to expand financial inclusion, enabling more citizens to access formal credit and strengthen their financial future.