Just why is it difficult for First Time Borrowers to obtain a loan?

Just why is it difficult for First Time Borrowers to obtain a loan?

In a 2014 report, RBI has made guidelines of never to reject loans to brand brand new or borrowers that are first-time. Nevertheless, numerous banking institutions and NBFCs will always be perhaps not comfortable financing to new borrowers. Very first time borrowers face a challenge that is unique getting that loan much like little if any credit rating available, it might be burdensome for credit agencies to determine a credit rating and lack of credit history helps it be burdensome for banking institutions to provide. This bring about an egg and chicken tale as getting that loan without credit rating is hard and creating a credit history without financing is probably not feasible.

How can banks choose to provide to borrowers that are new no credit rating?

Besides the risk rating for new borrowers from different credit reporting agencies, banking institutions have begun utilizing various surrogate parameters to measure the most likely credit behaviour of brand new borrowers.