In a recent Parliament session, the Finance Ministry clarified that CIBIL scores remain an important, but not mandatory, component of loan assessment. Union Minister of State for Finance, Pankaj Choudhary, explained that TransUnion CIBIL operates as one of four RBI-licensed Credit Information Companies (CICs) — alongside Equifax, Experian, and CRIF High Mark.
These CICs are regulated under the Credit Information Companies (Regulation) Act, 2005 and collect borrower repayment data, enabling banks and lenders to assess creditworthiness.
Why Is CIBIL Score Important?
Banks use CIC data to evaluate loan applicants’ repayment capacity. Reports include details like loan defaults, settlements, delayed repayments, or restructuring. This makes CIBIL and similar scores a key input in the credit decision-making process. However, the RBI has not mandated a minimum score for loan sanction. Instead, lenders consider a borrower’s entire financial profile and internal policies.
Can You Get a Loan Without a CIBIL Score?
Yes. The RBI has clearly stated that first-time borrowers cannot be denied loans simply for lacking a credit history. For such applicants, banks may use alternative methods like income evaluation and repayment ability instead of credit history. This ensures financial inclusion, especially for young borrowers.
Fees for Accessing Your Credit Score
By RBI regulation, CICs can charge no more than ₹100 for an individual’s credit score. Moreover, all CICs are required to provide one free full credit report annually, which includes the credit score. This empowers consumers to track and correct errors in their credit history.
Will CIBIL Be Replaced by a Government Body?
Contrary to speculation, the government has no plans to replace CIBIL with its own agency. While the National Financial Information Registry (NFIR) is being developed as a central repository of financial and credit-related data, its purpose is to supplement, not replace, existing CICs.
Safeguards Against Misuse of Data
To protect borrowers, RBI has mandated several safeguards for CICs:
- SMS/email alerts when credit reports are accessed.
- Internal Ombudsman within CICs to handle grievances.
- Access to the RBI Ombudsman under RBI’s Integrated Ombudsman Scheme (2021).
- Half-yearly Root Cause Analysis of complaints.
- One free annual credit report.
These measures aim to prevent misuse of data and enhance transparency for borrowers.
