Only one in four rural households aware of credit scores: Nabard survey

New Delhi: Barely one in four rural households in India understands what a credit score is and how it influences access to loans, exposing a major financial literacy gap, despite efforts to deepen formal credit penetration.

A June 2026 survey by the National Bank for Agriculture and Rural Development (Nabard) also found that high borrowing costs remain the biggest concern in the rural credit market, with around half of all households surveyed saying credit was too expensive. Many respondents said lower borrowing costs, including through interest subvention, could improve access to finance.

These findings come against the backdrop of Union budget 2026-27, which announced the introduction of a Grameen Credit Score framework to improve awareness of creditworthiness among rural borrowers, help them build formal credit histories and expand access to institutional finance.

Queries emailed to the spokespersons of Nabard, and the finance ministry on Sunday evening remained unanswered till press time.

The report, Rural Credit Market Conditions in India (A Study Based on an All-India Survey of Rural Households), found that fewer than one in four rural households understood what a credit score is and how it can improve—or hurt—their access to credit. Among those who were aware, nearly 31% said they had experienced an adverse change in their own credit score.

“The survey does indicate a couple of things. First, rural folks need to be educated on the need to maintain good credit scores. Second, a different approach to giving scores must be followed for them. Third, they must also be educated on the use of loans for productive purposes to generate income. This kind of advocacy is essential,” said Madan Sadnavis, chief economist, Bank of Baroda.

The bimonthly survey of rural economic conditions and sentiments also found that access to credit has not translated into higher incomes for most rural borrowers.

About 57% of households reported that their income did not increase after taking a loan. According to the survey, this may be explained by loans being used for purposes other than productive activities, as well as other challenges faced by borrowers.

It further noted a further decline in the share of non-institutional sources in the total outstanding debt of rural households to 16% in 2026, down from about 25% in 2022, and a peak of about 93% in 1951.

“Importantly, among various non-institutional lenders to rural households, friends and relatives dominate (with a share of more than 61%) and the share of moneylenders has dropped to as low as 13.6%,” said the survey report.

The survey also flagged an unintended consequence of digital banking —the vulnerability of customers to financial fraud.

The findings are based on a stratified multi-stage survey of 20,000 rural households across 29 states and Union Territories, making it one of the most comprehensive assessments of rural credit conditions in India.