Government Explains CIBIL Cannot Be Compulsory Parameter For Small Loans

The Government has clarified in the Rajya Sabha that CIBIL scores are not imperative parameters on the basis of which low-value loans like small education loans or agriculture loans are sanctioned. This was clarified through a written reply on December 9, 2025, against Question No. 1051 raised by Dr Kanimozhi NVN Somu. The Ministry of Finance stated that while creditors are obliged to seek Credit Information Reports, they are not obliged to a minimum score for approval for small-value loans.

The response by Pankaj Chaudhary, Minister of State in the Ministry of Finance, raised a concern that rigid credit score-based filtering could block access to students, small farmers and first-time borrowers. He also stated that the Reserve Bank of India (RBI) had been receiving representations from these categories, as well as from financial institutions, to ease the rigid CIBIL-based screening.

No Minimum Score Prescribed by RBI

The response, therefore, confirmed that RBI has not prescribed any minimum credit score that banks or non-banking financial companies (NBFCs) need to follow while sanctioning loans. While existing regulations require lenders to obtain Credit Information Reports from one or more Credit Information Companies CICs), the report is only one of the several inputs in the loan appraisal process.

The ministry also emphasised that, according to RBI rules, lenders could not reject first-time borrowers on the basis of no credit history. This is an important issue for students applying for their very first education loan or rural and low-income applicants who may not have previously accessed formal credit.

The government said credit-related decisions of banks and NBFCs are mostly deregulated, and lenders operate on their board-approved loan policies in compliance with regulatory and statutory norms. These policies enable the institutions to evaluate multiple parameters related to repayment ability, socio-economic factors, and the purpose of borrowing rather than depending on a single score.

CIBIL Data Remains Only One Part of Assessment

The response then explained that credit report information is only a single input in the lender's decision-making process and that it does not independently decide on loan outcomes. In other words, while lenders refer to credit scores from agencies like CIBIL, these are not handled as strict thresholds.

This is to reduce the fear of borrowers who feel that a low score or no score will result in automatic disqualification. This statement by the government indicates that lending institutions should adopt a more balanced view while considering loan applications, particularly for low-value loans to cover education, small-scale farming, and simple financial requirements.

Grameen Credit Rating to Lead Rural Borrowers

The reply also referred to the efforts to widen access to credit in rural areas. RBI has instructed CICs to develop a framework for Grameen Credit Score; this score will assess the credit requirement of rural borrowers, particularly small farmers who do not fit into the traditional credit assessment formats.

According to the ministry, this score is developed to improve access to formal credit for rural populations by providing a much-improved yardstick of creditworthiness. Once implemented, it is expected to help lenders make more informed decisions without over-relying on existing credit scores that might not fully capture rural financial behaviour.