In India, taking a loan has always been a challenge, especially for those who have a low credit history or no CIBIL score at all. Many first-time borrowers—whether young professionals, small business owners, or individuals from semi-urban and rural areas—often face rejection from banks because they don’t have a strong credit record.
But now, a major update from the Finance Ministry and the Reserve Bank of India (RBI) has brought much-needed relief. According to the new directive, banks cannot reject your loan application solely on the basis of a low or non-existent CIBIL score.
This move is expected to bring millions of people into the formal financial system and make India’s lending process more inclusive. Let’s break it down in detail—
What is a CIBIL Score and Why Does it Matter?
A CIBIL score is like a thermometer of your financial health. It reflects your repayment behavior and overall creditworthiness.
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The score ranges from 300 to 900.
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A score above 750 is generally considered good.
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With a good score, banks happily provide loans at lower interest rates.
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With a poor or no score, getting loan approval becomes difficult.
This creates a big challenge for first-time borrowers. Since they never took a loan before, they don’t have any credit history, and banks often hesitate to lend to them.
Government’s Big Decision: No More Stress Over CIBIL Score
Minister of State for Finance, Pankaj Chaudhary, recently clarified in Parliament that RBI has not mandated any minimum credit score requirement for loan approval.
This means:
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If you are applying for a loan for the first time, banks cannot reject your application just because you have no credit score.
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Even if your score is low, your application won’t be dismissed solely on this ground.
On January 6, 2025, RBI issued a Master Direction, stating that:
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Banks and financial institutions cannot reject loan applications only because the applicant has no credit history.
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Instead, they must evaluate applicants using other financial factors such as income stability, repayment capacity, and overall credibility.
This change is aimed at making lending practices more fair and inclusive.
But Wait—Loans Won’t Be Approved Without Checks
It is important to note that this decision does not mean loans will now be given freely without due diligence. Banks will still thoroughly assess an applicant before sanctioning credit.
Some factors they will consider include:
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Credit Information Report (CIR): If you have taken a loan earlier, repayment records will be visible here.
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Loan Repayment History: Whether you paid EMIs on time or defaulted.
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Loan Settlement or Restructuring: If you ever settled a loan for a lesser amount.
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Income and Employment Status: A steady salary or business income adds credibility.
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Other Financial Behavior: Your bank statements, savings, and spending patterns.
So, while low or no CIBIL score won’t automatically disqualify you, banks will still check your repayment capacity thoroughly.
How Much Does a Credit Report Cost?
According to RBI rules:
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Every individual is entitled to one free credit report per year, which also includes their credit score, provided they have a credit history.
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If you want additional reports in the same year, the maximum fee is capped at ₹100 only.
This ensures transparency and encourages people to stay aware of their financial health.
Is CIBIL Being Shut Down?
Recently, there were rumors that CIBIL is being closed or replaced. The Finance Ministry has clarified that:
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CIBIL is not shutting down.
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Nor is it being replaced by any government institution.
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CIBIL and other credit information companies will continue to function under the strict supervision of RBI.
This step is only to make lending easier for new borrowers and not to eliminate credit score systems.
Who Will Benefit the Most from this Change?
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First-Time Borrowers (Young Professionals):
Those who never had a loan or credit card can now apply without fear of rejection. -
Small Business Owners & Entrepreneurs:
Startups and MSMEs who often struggle to raise funds due to lack of credit history will benefit. -
People in Rural & Semi-Urban Areas:
Those who were left out of the banking system earlier will now have easier access to loans. -
Salaried Individuals with Low Scores:
Even if someone’s score is not ideal, their steady income can help them qualify.
Impact on the Economy
This decision is not just a relief for individuals but also a big boost for India’s economy:
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Greater Financial Inclusion: More people will enter the formal banking system.
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Building Credit History: First-time borrowers will slowly develop strong credit profiles.
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Boost for Small Businesses: Easy access to funds will help small enterprises grow.
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Increased Consumption & Investment: With loans being more accessible, spending and investments will rise.
Tips to Build a Good CIBIL Score
Even though low or no CIBIL score won’t block your loan anymore, having a good score is still highly beneficial. Here’s how you can improve or maintain a strong score:
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Pay EMIs and credit card bills on time.
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Use only 30-40% of your credit card limit.
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Avoid applying for multiple loans or cards at once.
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Do not close old credit cards – they show a longer repayment history.
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Check your credit report once a year to spot errors or defaults.
A strong score means lower interest rates and faster approvals.
Conclusion: A Historic Relief for Loan Seekers
For years, millions of Indians were denied loans simply because they had no CIBIL score or a low one. But now, with the Finance Ministry and RBI’s new rules, this barrier has been removed.
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Banks can no longer reject applications just on the basis of credit score.
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They will have to assess your income, repayment capacity, and overall financial health.
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CIBIL and other credit bureaus will continue to function, but their role will now be more balanced.
This is a game-changing decision for young professionals, small businesses, and first-time borrowers. It paves the way for greater financial freedom and economic growth.
Now, with the “CIBIL Score tension gone,” millions of Indians can take their first step towards loans, credit history building, and financial independence.
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