PSBs Offering Home Loan Options Using Customers’ CIBIL Scores

India’s first credit bureau, TransUnion CIBIL Ltd, is renowned for providing credit score to the customers based on their credit profile and repayment history. began giving credit scores to customers. CIBIL score has become an important parameter to determine if the applicant is worthy enough to be granted a loan. Loan applications are approved or rejected based on CIBIL Score, but the scenario has seen a slight change in recent times and PSBs (Public Sector Banks) have contributed to the same. 

PSBs have started to offer loans to customers based on differential interest rates. With advancements in technology and its entry into the financial sector, customers can access home loans online and get information to various financial products. 

Some banks are already using credit scores, among other things, to classify consumers with different risk buckets. Banks are also categorizing the interest rates in different buckets based on credit score slabs. Some banks have started categorizing customers as prime and subprime to offer differential interest rates. New to credit customers are normally offered higher interest rates as their repayment behaviour is yet not known. The floating rate is linked to an external benchmark and will be independent of loan amount or duration. This means if the customer’s credit score improves during the duration of the repayment, the interest rate would be lowered accordingly and vice versa. 

With the disruption of fintech financial services, credit scores are becoming increasingly important. Telecom operators have started using credit scores to offer limits to new customers, while insurance companies are using it to remove high-value covers. People can also use it to get late payment services from online shopping forums or kitchen aggregators, where they can use their credit limit and return on time.