First-Time Borrowers Can Get Loans Without Minimum CIBIL Score – Here’s How Banks Decide Eligibility

In a major relief for first-time loan applicants, the government has clarified that a minimum CIBIL score is not mandatory to apply for a loan. Minister of State for Finance, Pankaj Chaudhary, informed Parliament during the monsoon session that as per the Reserve Bank of India’s (RBI) guidelines, banks cannot reject a loan application merely because the applicant has no credit score or a low score.

This announcement brings good news for individuals who are yet to take their first loan or credit card. But the key question remains: if not CIBIL, then on what basis do banks and NBFCs approve loans?

How Banks and NBFCs Assess First-Time Loan Applicants

Since first-time borrowers often lack any formal credit history, banks and non-banking financial companies (NBFCs) rely on alternative parameters to determine whether an applicant can repay the loan. Here are the primary factors considered:

1. Income and Job Stability

The most important factor is the applicant’s earning capacity and employment stability.

• For salaried employees, lenders check salary slips and employment records.

• For self-employed individuals, income tax returns (ITRs), business turnover, and bank account statements are reviewed.

2. Age and Applicant Profile

Most lenders require applicants to be at least 21 years old. Age also matters in terms of repayment ability—especially for long-term loans like home loans. Banks prefer cases where repayment is possible well before retirement.

3. Existing Debt and EMI Burden

Banks calculate the Debt-to-Income Ratio (DTI) to see how much of the applicant’s income is already going toward loan repayments. If existing EMIs consume more than 40–50% of monthly income, lenders are hesitant to approve fresh loans.

4. Banking History and Collateral

For those without a credit score, lenders review their banking history—such as savings accounts, fixed deposits, or regular business transactions. In the case of secured loans like home, auto, or gold loans, the collateral value plays a decisive role.

5. Employer Reputation

Applicants working in government jobs or reputed multinational companies are generally seen as more reliable. On the other hand, people with unstable jobs or small businesses may be asked to submit more documents to prove repayment ability.

Why Credit Discipline Still Matters

Even though the government has removed the minimum CIBIL score requirement, experts advise borrowers to build and maintain healthy credit behavior. Regular bill payments, disciplined use of digital transactions, and avoiding defaults on utility bills help create a positive financial profile.

Financial apps such as BankBazaar, Paisabazaar, and PhonePe also allow individuals to check their credit report once a year free of cost. If any errors are found, corrections can be requested through credit bureau websites.

Expert Views on the New Guidelines

Atul Monga, Co-Founder and CEO of BASIC Home Loan, welcomed the move, saying it ensures that first-time applicants are not unfairly rejected. According to him, lenders will now evaluate other data points such as electricity bills, water bills, and digital payment records. This will make loan approval processes more transparent, data-driven, and fair.

He added, “For new borrowers, this change means that if they demonstrate financial discipline, they will stand a better chance of loan approval, even without a credit history. It will also bring more people into the formal banking system without compromising on lending standards.”

Bottom Line

The government’s clarification marks a positive shift for first-time borrowers. While a high CIBIL score remains valuable for quicker loan approvals and better interest rates, its absence will no longer be a roadblock. Instead, factors such as steady income, employer credibility, repayment capacity, and financial discipline will play a bigger role in determining loan eligibility.

For millions of Indians who were previously outside the formal credit system, this decision opens the door to new financial opportunities.