No credit history? RBI says banks can’t reject your loan application

The Reserve Bank of India (RBI) has directed all banks and lending institutions not to reject loan applications merely on the grounds of an applicant having no credit history. The directive covers public and private sector banks, housing finance firms, and other financial institutions.

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In its Master Directions issued on January 6, 2025, the RBI explicitly advised credit institutions to evaluate applications from first-time borrowers without bias. The Finance Ministry reiterated this in Parliament on August 18, 2025, while responding to concerns raised during Question Hour.

No minimum credit score

The RBI has not prescribed any minimum credit score for loan approval. While lenders are required to review a borrower’s credit information report, including the score, the final decision rests on each institution’s internal policies and commercial judgement. The credit score is treated as just one among several factors in the assessment.

The central bank emphasised that the lack of a credit history should not be the sole reason to deny a loan, particularly in the case of first-time borrowers who may have never availed loans or held credit cards.

Unified lending interface

The directive comes in response to rising complaints that borrowers lacking a credit history or CIBIL score are often denied credit. Financial expert Ashwani Rana, founder of Voice of Banking, pointed out that first-time applicants should be evaluated through alternative parameters such as income tax returns and bank statements.

He added that the government is developing a unified lending interface as an alternative to existing credit information systems like CIBIL. The platform is aimed at creating a more inclusive credit assessment model, enabling access for borrowers currently outside the formal credit system.

Centralising financial data

In the Union Budget 2023–24, the government announced the National Financial Information Registry (NFIR), a centralised database for individuals’ credit and financial data. Once operational, it will allow lenders to make more informed decisions based on comprehensive borrower profiles.

The NFIR will be set up under the RBI’s guidance. However, the government has clarified that it does not intend to replace TransUnion CIBIL, which will continue to function as the country’s primary credit bureau.

Credit report access

The RBI has authorised four companies to operate as credit information providers in India: TransUnion CIBIL, Equifax, Experian, and CRIF High Mark. These agencies may charge up to ₹100 for providing an individual’s credit score.

Since September 1, 2016, the RBI has mandated that every credit bureau must provide individuals, whose data is available with them, one free online credit report each year, including their credit score.

To promote transparency, lenders must notify customers via SMS or email whenever their credit reports are accessed. In case of a default or delayed EMI payment, borrowers are required to receive immediate alerts.

RBI warns against credit bias

While credit reports remain central to loan evaluation, banks now base their decisions on internal policies set by their boards, in line with the RBI’s regulatory framework.

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The Credit Information Report (CIR) offers detailed insights, such as past EMI payment behaviour, restructured or settled loans, and any write-offs, enabling lenders to better assess a borrower’s repayment capacity.

The RBI has emphasised that while this information is important, it should not be used to discriminate against individuals with no prior credit history.

(This article was originally published in The Federal Desh.)