'Don't reject loans over CIBIL score': Karnataka government tells banks

Bengaluru: The Siddaramaiah administration has asked banks not to reject home loan applications under government schemes, citing low CIBIL scores, a hurdle that has hit beneficiaries in the affordable housing segment. 

The Credit Information Bureau (India) Ltd (CIBIL) score is a summary of a consumer’s credit history based on past credit behaviour, such as borrowing and repayment habits shared regularly by banks and lenders. 

“No application should be rejected because of a low CIBIL score,” Chief Secretary Shalini Rajneesh said at a recent State Level Bankers’ Committee (SLBC) meeting, as recorded in the minutes.

She further asked banks to sanction loans “within one month of receiving applications”. 

Time and again, the government, through SLBC, has been raising housing loans, which fall under the Reserve Bank of India’s (RBI) priority sector lending. 

According to the minutes of the meeting, the chief secretary said the cost of constructing one house is approximately Rs 5 lakh.

“The Government of India and the Government of Karnataka together provide Rs 2.5–3 lakh subsidy, leaving a gap of Rs 2 lakh. Due to this gap, over the last decade, several lakh houses remain incomplete, with beneficiaries unable to mobilise further resources,” she said. 

“Beneficiaries are already scrutinised and sanctioned through Gram Sabha/committee approvals. Hence, delays on procedural grounds are unjustified,” banks were told. 

The government has asked the Rajiv Gandhi Housing Corporation Ltd (RGHCL) and the Housing Department to prepare district-wise, taluk-wise and gram panchayat-wise ‘line lists’ of pending housing loan applications. 

At the recent SLBC meeting, Additional Chief Secretary-cum-Development Commissioner Uma Mahadevan also reiterated that CIBIL score should not be a criterion for rejection of loan applications under government housing schemes.

“However, the RBI clarified that credit history is to be checked only to ensure the applicant is not a defaulter. It cannot be the sole ground for rejection,” she said, as per the minutes. 

Under the annual credit plan (ACP), banks have a target of lending housing loans worth Rs 11,678 crore in Karnataka in 2025-26. The total outstanding housing loan amount in the state is Rs 52,529 crore. 

In 2020, the previous BJP government had asked banks not to reject crop loan applications, citing creditworthiness scores, especially by CIBIL. 

The government is deploying a new “end-to-end software” to map housing loan applications and monitor pendency.