📷 In FY25, only 16 per cent of NTC loans were extended by banks and the rest were facilitated by shadow lenders, says a banker | Photo Credit: PRASHANTH VISHWANATHAN
Following the government and Reserve Bank of India’s (RBI) fresh push for banks to sanction loans to new-to-credit (NTC) customers without established credit bureau scores, lenders have started turning to alternate data sources for sanctioning loans to first-time borrowers.
“Alternate data sources like payment of utility bills, mobile, telecom bills, UPI channels, e-commerce usage of customers (are being used to sanction loans to NTC customers),” said Rajneesh Karnatak, MD & CEO, Bank of India.
Karnatak said in FY25, only 16 per cent of NTC loans were extended by banks and the rest were facilitated by shadow lenders. The reason, he says, was the lack of structured data on NTC customers rather than risk aversion by banks.
He said credit bureau scores alone do not influence the decision of bankers to sanction loans to new or existing customers. In home loans, credit bureau score carries only 15 per cent weightage in assessing the loan proposal, while for vehicle loans and personal loans, credit bureau score has 20 per cent weightage.
His comments come on the heels of Union Minister of State for Finance Pankaj Chaudhary clarifying that the RBI has not prescribed any minimum credit score requirement for loans to NTC. Referring to the RBI’s Master Direction issued on January 6, 2025, Chaudhary said, “First-time borrowers’ loan applications should not be rejected just because they have no credit history.” He said lenders are free to take commercial decisions based on board-approved policies and broad regulatory guidelines.
Credit signals
According to Nikhil Kurhe, co-founder and CEO at Finarkein Analytics, lenders are increasingly turning to alternative data sources such as utility and mobile bill repayments, digital payments, employment stability, and bank statement cash flows accessed securely via consent-based systems like the Account Aggregator framework for sanctioning loans to NTC customers.
“These signals give lenders valuable insight into repayment capacity and intent, even in the absence of a credit score. Some lenders also leverage psychometric assessments and social credit signals to build a holistic profile before sanctioning loans,” he said.
Kurhe says large public and private sector banks typically relied most heavily on the CIBIL score when processing retail and home loans, often using it as the main eligibility benchmark. Housing financiers, too, depend more on bureau scores, while microfinance lenders and many NBFCs catering to informal or thin-file customers and fintech lenders are structurally less reliant on bureau scores since a large share of their borrowers fall outside the traditional credit net.
Source: thehindubusinessline.com
