Are Stricter Loan Approval Requirements Making Borrowing Tougher in 2025? Understand the Situation Before Applying

Banks have quietly changed the way they screen personal loan applicants, and many borrowers now face unexpected rejections. A new lending pattern is taking shape, and income alone is no longer enough to qualify.

Ever felt confused when a bank rejects a personal loan even though income looks steady. Many borrowers say this a lot these days. A report by Economic Times in February 2025 confirmed that fintech firms issued 10.9 crore personal loans worth ₹1,06,548 crore in FY 2024 to FY 2025. Soon after, lenders turned cautious, the shift toward stricter loan approval requirements became noticeable everywhere.

Most banks now read salary slips, bank statements, EMI load and even spending habits with more care. This shift changed the way personal loan eligibility criteria are judged. People keep looking for simple answers, something that helps them determine personal loan approval without too many calculations. Feels like a small thing, but it matters now.

Why Income and Credit Score Became the New Priority?

Salary decides repayment power. Credit score shows how a person handled past loans. Together these two set the tone for credit score requirements for loans. Many earlier articles separated these points. Today they move like a pair.

Public banks usually keep EMIs around forty to fifty percent of net pay. A small table below shows how people often calculate loan amount by salary based on this rule.

Before the table, a small note. These numbers come straight from PSU style guidelines used across many Indian banks.

LoansJagat also shared a key trend in its February 2025 update. It said borrowers earning around ₹50,000 a month often qualify for EMIs near ₹25,000, which sets a rough loan amount near ₹12 lakh for five years. 

Small detail, but it shows how income decides personal loan eligibility criteria. People want simple ways to determine personal loan approval because rules feel tighter now.

This helps borrowers make a quick judgement at home before stepping into a branch. Sometimes small checks like these save time.

How This Trend Matches Older News

There was a Mint report in late 2024 about people with scores above 700 still getting rejected. Strange for many. The link is here.

That story showed a big gap. Good score, yet rejection. Maybe because income or EMI load did not fit the rule. RBI’s update in January 2025 also showed a 14.2 percent slowdown in personal loan growth for that period. Banks reacted by tightening terms. The table below reflects how public banks usually read credit score bands.
 

These ranges give some clarity. Not perfect, but good enough for home checks.

Conclusion 

In 2023 and 2024, RBI advised lenders to keep a close watch on unsecured borrowing. Banks responded slowly at first, then sharply tightened standards, including income scrutiny, spending behaviour tracking and stricter EMI norms.

Feels like a slow change that suddenly picks up speed.

 

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About the Author

LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.