Banks in India are getting picky about who gets money. They now direct most new loans toward borrowers with top credit scores of 730 and above. This cautious move comes as job growth in corporate sectors stays uncertain because of AI changing how work gets done.
The latest data from TransUnion CIBIL confirms this clear shift. Lenders show strong risk aversion even as the broader credit market displays signs of improvement.
Lenders Shift Focus to High Credit Score Borrowers
Banks now heavily favor prime and above prime borrowers. TransUnion CIBIL data reveals that the bulk of fresh loan originations go to people with CIBIL scores of 730 and higher. This group enjoys easier access to funds while riskier segments see much less activity.
The share of new to credit customers dropped sharply. It fell to 16 percent in January 2026 from 22 percent two years earlier. Lenders prefer dealing with existing customers they already know well. They also push for higher ticket size loans that bring better returns with lower perceived risk.
Bhavesh Jain, MD and CEO of TransUnion CIBIL, noted the clear industry preference. Lenders chase prime borrowers and stick with existing relationships where loan amounts run higher. This approach helps protect balance sheets amid economic headwinds.
Corporate India faces tentative job expansions. AI tools handle many repetitive tasks that once needed large teams. This situation makes banks nervous about unsecured lending to younger or less proven borrowers who might face income instability.
Gold Loans Take Center Stage in Retail Lending
Gold loans now lead the retail lending pack. They account for 36 percent of new loans by volume and 39 percent by value. This makes them the single largest contributor to fresh retail credit supply.
Rising gold prices encourage people to pledge jewelry for bigger loans. The average gold loan ticket size reached Rs 1.9 lakh in the three months to December 2025. It has grown 1.8 times since March 2023. Higher collateral values allow safer lending with strong security.
Gold loans offer banks a safer bet. The loans stay fully secured against physical assets that hold value well. This explains why they surge even as lenders pull back from personal loans or credit cards for lower score customers.
Outstanding gold loan balances now rank second only to housing loans. The organized gold loan market continues expanding rapidly. Banks and NBFCs compete aggressively in this segment because defaults remain low and recovery proves straightforward.
Job Market Caution Drives Lending Restraint
AI disruption affects hiring patterns across key sectors. Companies move slower on campus recruitment and lateral hires for roles that technology can automate. This creates uncertainty for millions of young professionals entering the workforce.
Banks notice these signals. They respond by tightening standards for fresh borrowers without strong credit histories or stable income proof. First time borrowers find doors closing while those with years of good repayment records receive better offers.
This selective approach helps banks maintain healthy asset quality. Delinquencies in most retail segments improved over the past year. The only notable stress appears in micro loans against property where 90 plus days past due edged up slightly but stayed range bound.
The strategy protects the financial system. Stronger banks mean greater stability for depositors and the overall economy. Yet it creates challenges for those still building their financial footprint.
Credit Market Shows Clear Signs of Improvement
Despite the risk off mood, positive trends emerge. TransUnion CIBIL’s Credit Market Indicator rose to 102 in the quarter ended December 2025. It stood at 97 in the same period a year earlier.
Asset quality across retail products got better. Balance level delinquencies of 90 plus days past due declined in most categories. This improvement lifted the performance sub index to 107 from 101 previously.
Supply side indicators also strengthened. The supply CMI moved up to 98 from 91 as gold loans and other secured products gained momentum. Overall bank credit growth hovered around 14 percent year on year in recent months.
These numbers suggest the credit ecosystem grows healthier even as lending becomes more selective. Banks clean up past issues while focusing on quality over quantity in new disbursements.
Here are key numbers that tell the story:
- Prime borrowers (730+ CIBIL): Bulk of new loan originations
- New to credit share: 16% in Jan 2026 (down from 22% two years ago)
- Gold loans in retail supply: 36% volume, 39% value
- Average gold loan size: Rs 1.9 lakh (up significantly)
- Credit Market Indicator: 102 (up from 97)
How Borrowers Can Navigate This Selective Market
Building a strong credit score matters more than ever. Pay all EMIs and credit card bills on time. Keep credit utilization below 30 percent. Avoid multiple hard inquiries in short periods.
People with gold assets gain an advantage. They can access funds quickly through gold loans at competitive rates. This secured route serves as a practical alternative when unsecured credit proves harder to obtain.
Young professionals should focus on steady income streams and emergency savings. Lenders look for proof of repayment capacity beyond just the score. Starting small with secured products can help establish positive credit behavior.
Existing borrowers with good track records can negotiate better terms. Banks value long term relationships and often reward them with higher limits or lower rates.
This environment rewards financial discipline. It punishes those who treat credit casually. Over time it may push more Indians toward better money habits.
The banking sector walks a careful line. It balances growth ambitions with the need to protect against potential slowdowns. For millions of Indians chasing dreams of homes, vehicles or small businesses, access to credit shapes their future.
Banks turning risk off today aim to stay strong tomorrow. Their caution might slow some aspirations in the short term. Yet it builds foundations for more stable credit availability in the years ahead.
What are your thoughts on banks becoming more selective with loans? Have you faced tighter rules recently or benefited from a strong credit score? Share your experiences in the comments below. Your stories help others understand this shifting landscape.
