Will your loan application be rejected if you are first-time borrower with no credit history? Here's what Finance Ministry says

Are you applying for a loan for the first time but have no credit history? Will the lender reject your loan application? Well, you need not to worry. The Ministry of Finance has reiterated the Reserve Bank of India’s stand in such matters, clarifying that the loan application for first-time borrowers can’t be rejected because they have no credit history In a recent response to a query in Parliament, Pankaj Chaudhary, Minister of State, Ministry of Finance, clarified several points related to credit score, CIBIL reports, authorised agencies to issue credit reports, and whether credit history is mandatory for first-time loan borrowers to apply for a loan.

ET Wealth Online breaks down the key takeaways from the Finance Ministry’s official reply.

Loan for borrowers with no credit history

Referring to a master circular by the Reserve Bank of India (RBI), the minister said that lenders can’t reject the loan application of a first-time borrower with no credit history.

“Reserve Bank vide referred Master Direction dated 6.1.2025 has advised CIs that first time borrowers’ loan applications should not be rejected just because they have no credit history,” Chaudhary said in response to an unstarred question from Sudha R, Member of Parliament.

Has RBI set a minimum credit score for loan approval?

The minister said that the RBI has not set any minimum score for loan approval.
“Lenders are free to decide based on their policies and other factors. 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, broad regulatory guidelines, and the information contained in the Credit Information Report and various other inputs/factors. ,

When asked whether the government has a plan to remove CIBIL scores as mandatory requirement for home loans and gold loans from private and scheduled banks, the minister said, “With regard to credit score being mandatory for availing of loans, RBI has apprised that banks, at the time of doing credit appraisal, are expected to undertake due diligence from various sources, including examining the credit history of the borrower based on the CIR from CICs. Credit-related matters of Regulated Entities (REs) are largely deregulated and the same are governed by the Board approved loan policies of the REs framed under the ambit of relevant regulatory and statutory requirements and terms and conditions of the loan agreement between the borrower and the RE. In this context, information on past repayment history, including information on delayed repayments, loans settled, restructured, written-off, etc., in the CIRs, is essential for assessing the creditworthiness of a borrower and to enable lenders to make informed credit decisions.”

In response to whether the government has authorised any organisation to prepare CIBIL score and paid any fees to such organisation, Chaudhary said that the RBI has granted Certificate of Registration (CoR) under Section 5 of CICRA to four Credit Information Companies (CICs) for carrying on the business of Credit Information in India. These four CICs are-
• TransUnion CIBIL Ltd.
• Equifax Credit Information Services Pvt Ltd.
• Experian Credit Information Company of India Pvt Ltd.
• CRIF High Mark Credit Information Services Pvt Ltd.”

Maximum charges for providing credit score report

Speaking about the maximum amount a CIC can charge for providing a credit report to an individual, the minister said, “The fee chargeable for obtaining credit score is regulated by RBI under the Credit Information Companies Regulations, 2006, which provide that a CIC may charge an amount not exceeding Rs 100 for providing to an individual his own credit information. Further, vide circular dated 1.9.2016 on “Free Annual Credit Report to Individuals”, RBI has advised every CIC to provide one free full credit report including credit score in electronic format, once in a year to individuals whose credit history is available with the CIC.”