New Delhi: The Finance Ministry has clarified that banks cannot reject loan applications from first-time borrowers solely on the basis of a low or missing CIBIL score. In a written reply to Parliament, Minister of State for Finance Pankaj Choudhary said that while credit scores are important, they are not mandatory for individuals with no credit history.

Key Clarifications From the Finance Ministry

1. CIBIL Score Not Mandatory for New Borrowers
   RBI guidelines issued in January 2025 state that first-time borrowers should not be denied loans simply because they have no credit history.
2. CIBIL Is Just One Input
   Banks and lenders use information from Credit Information Companies (CICs) like CIBIL, Experian, Equifax, and CRIF High Mark, but this is only one factor among many in evaluating a loan application.
3. No RBI-Mandated Minimum Score
   The RBI has not prescribed a minimum CIBIL score for loan approval. Lenders take decisions based on commercial considerations, internal policies, and regulatory guidelines.
4. Borrower Rights on Credit Reports
   CICs must provide one free credit report—including score—per year to individuals. If borrowers wish to access their report more often, the maximum fee is capped at ₹100.
5. Functions of CIBIL and Other CICs
   Under the Credit Information Companies (Regulation) Act, 2005, CICs collect and share data on repayment history, defaults, settlements, and financial standing, retaining such information for at least seven years.
6. Safeguards Against Misuse
   The RBI has strengthened grievance redressal mechanisms. CICs must notify customers whenever their report is accessed, enable reviews by an Internal Ombudsman before rejections, and escalate unresolved complaints to the RBI Ombudsman under the 2021 integrated scheme.

Will CIBIL Be Replaced?

The government has announced the creation of a National Financial Information Registry (NFIR) as a central repository of financial data. However, the Finance Ministry confirmed there is currently no plan to replace CIBIL or other CICs.

Bottom Line

For first-time borrowers, the absence of a CIBIL score cannot be used as a reason for outright rejection. Banks are expected to look at other financial and personal details before making a lending decision.

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