CREDIT SCORING
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Retail Banking and Wealth Management — JAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What is credit scoring in the context of retail banking?
Credit scoring is a statistical method used by banks to evaluate the creditworthiness of a borrower by assigning a numerical score based on their credit history, repayment behaviour, and financial profile.
What is the minimum CIBIL score typically required for a personal loan in India?
Most lenders require a minimum score of 700 or above.
Which regulatory body in India oversees the framework for credit information companies?
The Reserve Bank of India (RBI) oversees credit information companies under the Credit Information Companies (Regulation) Act, 2005 (CICRA).
What are the main components that typically influence a credit score?
Payment history, credit utilisation, length, mix, and new enquiries.
What is a CIBIL score and what range does it fall in?
A CIBIL score is a three-digit credit score generated by TransUnion CIBIL ranging from 300 to 900, where a higher score indicates better creditworthiness.
What does a high credit utilisation ratio indicate to lenders?
High dependence on credit, signalling potential repayment risk.
What CIBIL score is generally considered ideal for loan approval by most Indian banks?
A CIBIL score of 750 and above is generally considered ideal and indicates a low credit risk, making loan approval easier and often fetching better interest rates.
What is the recommended credit utilisation ratio for maintaining a healthy credit score?
Below 30% of the total available credit limit.
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