No Credit Score? Relax!! Centre Says First-Time Borrowers Can Still Get Loans

The Ministry of Finance has cleared the air regarding the role of credit scores, specifically the CIBIL score, for first-time borrowers seeking loans. It confirmed that borrowers who do not have a prior credit history are not required to possess a CIBIL score to be eligible for a bank loan. This important clarification was issued by Minister of State for Finance, Pankaj Chaudhary, during the 2025 Monsoon Session of Parliament.

 

This dispels a common misconception that a minimum credit score is a prerequisite for bank loan approval, especially among new borrowers entering the credit system for the first time.

 

RBI Guidelines and the Deregulated Credit Environment

Minister Chaudhary referred to the Reserve Bank of India's Master Direction dated January 6, 2025, which advises that loan applications from first-time borrowers should not be automatically rejected solely on the absence of a credit history. This directive ensures that banks cannot deny loans to fresh borrowers just because they lack a CIBIL score.

 

Furthermore, the RBI has not prescribed any minimum credit score threshold for granting loans. Instead, individual lenders decide eligibility criteria based on their internal board-approved policies and various other factors, including the overall financial profile of the applicant.

 

In this deregulated environment, lenders take commercial decisions by considering the Credit Information Report (CIR) as one of several factors, not the sole criterion.

 

What is a CIBIL Score and Why Does It Matter?

A CIBIL score is a three-digit number ranging between 300 and 900, reflecting an individual’s creditworthiness based on their repayment history and credit behavior tracked by the Credit Information Bureau (India) Limited. A high score indicates healthy credit management, improving chances of loan approvals and better interest rates.

 

While not mandatory for first-time borrowers, having a good credit score helps lenders evaluate risk, tailor loan offers, and determine interest rates and credit limits accordingly.

 

Practical Implications for First-Time Borrowers

First-time borrowers can avail loans without worrying about their credit score, but banks will still conduct due diligence using other financial documents and background verification. This approach encourages new borrowers to enter the credit market without fear of immediate rejection due to lack of history.

 

Meanwhile, existing borrowers are encouraged to maintain timely payments and responsible credit usage to build or improve their credit scores, which will facilitate smoother transactions in future credit requirements.

 

RBI’s Move Toward Real-Time Credit Data and Impact on Borrowers

In addition to relaxing mandatory credit score requirements for first-time borrowers, the RBI has introduced reforms requiring lenders to update credit data every 15 days instead of monthly to enable real-time credit monitoring and faster rectifications. This enhances transparency and benefits borrowers by reflecting positive behaviors like timely repayments much sooner.

 

RBI’s reforms also nudge lenders to use automated underwriting systems that assess multiple factors beyond the credit score, enabling balanced decision-making.

 

Conclusion: What Borrowers Need to Know

This clarification by the Centre and RBI reassures millions of first-time loan seekers and promotes financial inclusion by lowering barriers to credit access.

 

Relevant Sources: My Pune Pulse, The Daily Jagran, Economic Times Wealth, NewsBytes, Loans Jagat