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

New Delhi: Barely one in four rural households in India know what a credit score is and how it affects access to credit, exposing a wide financial literacy gap despite efforts to increase formal credit penetration.

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

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

Questions sent by email to Nabarda spokesperson a the Treasury remained unanswered by press time on Sunday evening.

message, Rural Credit Market Conditions in India (a study based on the All India Rural Household Survey), found that less than one in four rural households understand what a credit score is and how it can improve – or hurt – their access to credit. Among those who were aware, nearly 31% reported experiencing an adverse change in their own credit score.

“The survey shows several things. First, rural people need to be educated about the need to maintain a good credit score. Second, a different scoring approach needs to be adopted for them. Third, they also need to be educated about using loans for productive purposes to generate income. This kind of advocacy is essential,” said Madan Sadnavis, Chief Economist, Bank of Baroda.

The two-month survey of rural economic conditions and sentiment also found that access to credit did not translate into higher incomes for the majority of the population. rural borrowers.

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

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

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

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

The findings are based on a stratified multistage survey of 20,000 rural households across 29 states and union territories, making it one of the most comprehensive assessments rural credit conditions in India.