Banks to Use GSTN Data for Loan Approvals, Reducing Dependence on CIBIL Scores

The reliance on CIBIL scores for loan approvals is set to reduce as banks and financial institutions will now be able to assess applicants’ creditworthiness using GST Network (GSTN) data. The move comes after the Ministry of Finance’s Department of Financial Services directed all government and private banks to integrate with the GSTN system for credit risk evaluation.

 

Under this new arrangement, loan officers will be able to access GSTN data to verify the business performance, sales, and tax compliance of applicants—especially for small and medium enterprises (SMEs). This data-driven assessment is expected to make the loan approval process more inclusive, particularly for entrepreneurs and businesses without a formal credit history.

 

GSTN, a digital platform that consolidates indirect tax information, will provide a holistic view of an applicant’s financial activities, enabling banks to make informed lending decisions. Officials say the system will help reduce the cost of credit appraisal and shorten loan processing times.

 

The move aims to address the challenges faced by borrowers with low or no CIBIL scores, who often struggle to access formal credit despite having strong business fundamentals. By leveraging GST return filings and transaction records, banks can now evaluate repayment capacity without relying solely on traditional credit bureau data.

 

Financial experts believe this shift will not only improve access to finance for small businesses but also encourage tax compliance, as accurate GST filings will directly impact loan eligibility. The integration is part of the government’s broader strategy to promote data-based lending and enhance financial inclusion.