Bank Loan Rules: Banks May Soon Start Checking Loan Borrowers' Criminal Records Before Granting Approval; Full Details

Bank loan Eligibility: In a significant step to enhance security, banks may soon introduce a new rule for loan approvals that includes checking of criminal record of the applicant along with credit score, estimating cash flow, and verifying collateral. The purpose of the rule is to initially discourage loan proposals from borrowers with serious criminal records.

According to reports, this proposed move was discussed at a recent meeting of bankers. Once a formal system for checking criminal records is established, borrowers with criminal record violations will be filtered out.

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Along with this, the move is also aimed at relieving bankers of the hassle of dealing with borrowers who are stubbornly reluctant to pursue recovery actions against them, including those who don't worry about their mortgages being seized. The move will further help lenders to eliminate such cases at an early stage.

According to the Bankers, credit expansion is essential, but stricter regulations are also necessary. Therefore, banks want to implement another filter before granting any type of loan.

With loans cleared through mobile apps, lenders have eliminated the system of in-person information collection for small borrowers making lending a faceless process. For corporate credit evaluations, a borrower's market reputation is still considered; however, specific input on borrowers' criminal records will help them make better credit decisions.

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Experts believe that if this is done with consent, clarity, and adherence to data-protection regulations, banks have the legal right to access criminal record information.