RAS question
CIBIL score is used for:
Correct answer: (A) Assessing creditworthiness of individual borrowers.
The CIBIL score is used to assess the creditworthiness of individual borrowers.
Explanation
A CIBIL score, now associated with TransUnion CIBIL, is a three-digit credit score in the 300-900 range that indicates an individual borrower's creditworthiness. The RBI's financial awareness booklet explains that a credit score is based on a borrower's credit history and other factors, and is given with a credit information report issued by a credit information company. Banks and financial institutions check the score and credit history, along with other factors, while sanctioning loans. A score above 750 is generally treated as good, because a higher score signals a more reliable borrower who has repaid loans from banks or financial institutions on time.
Why the other options are wrong
- (B) Government bonds are rated by credit rating agencies, whereas CIBIL is a borrower-level credit score used in lending decisions.
- (C) Stock market valuation concerns the pricing of shares, while a CIBIL score records an individual's credit behaviour and repayment profile.
- (D) Bank audit examines a bank's records and controls; CIBIL does not audit banks, it helps lenders assess borrowers.
Concept
This tests the financial-sector basics of credit information companies and retail lending. It recurs in RAS because banking terms such as credit score, credit history and loan sanctioning are standard parts of Indian Economy questions.