The Finance Ministry has issued a clarification about CIBIL score requirements for those seeking a bank loan — explaining that it could not be a reason to deny first-time borrowers. The Lok Sabha was also told earlier this week that the Reserve Bank of India had not not prescribed any minimum credit score for loan applications. Most banks have made CIBIL an important criterion for borrowing — often requiring a score of at least 700 to consider loan or credit card applications.
No minimum credit score rule
“RBI has not prescribed any minimum credit score for sanction of 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. The information contained in the Credit Information Report would be one of the inputs that lenders would consider before granting any credit facility to a prospective borrower,” clarified MoS Pankaj Chaudhary.
The Minister of State also noted that the Reserve Bank had advised credit institutions that the loan applications of first time borrowers “should not be rejected just because they have no credit history”.
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A CIBIL score is a three-digit number between 300 and 900 that shows how ‘credit-worthy’ a person is considered. The number is based on their past credit behaviour — such as timely repayment of loans, credit card bills, and EMIs — and helps lenders decide whether it is ‘safe’ to let them borrow money. Income proof, employment details, collaterals and even guarantors become ways to assess borrowers in the absence of a CIBIL score.
Chaudhary also reiterated that there were currently four credit information companies authorised to prepare a CIBIL score in India: TransUnion CIBIL Ltd, Equifax Credit Information Services Pvt Ltd, CRIF High Mark Credit Information Services Pvt Ltd and Experian Credit Information Company of India Pvt Ltd. The RBI regulates fees for credit scores and mandates one free annual credit report to individuals.
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