Can Your PIN Code Affect Your Loan Application?

Loan providers including traditional banks and new-age Non-Banking Financial Companies go to great lengths to minimize the risk on their end. So, when a customer applies for a personal loan, home loan, etc. they check a variety of factors such as the credit score, repayment history, monthly salary, current debt, etc. However, can something like the PIN code of an applicant affect the loan application too? As surprising as it may sound, the answer is “yes”.

Connection Between Location and Creditworthiness

Most people don’t know this, but all the major banks in the country monitor the performance of their portfolios in different PIN codes. This is how they identify the locations where there are more instances of loan defaulting than the others. Many of these PIN codes i.e. locations are inhabited by families with a weak financial background. Thus, they are more likely to fail in their loan repayments.
Although the rural regions in the country are deemed as risky by many banks, even the urban regions are approached selectively. This is because in many tier-I, tier-II cities there are certain areas that are impoverished. So, the banks may blacklist the PIN codes of these few areas as a safety measure.
Other than the financial factor, there is this risk of security too. For instance, in areas where the law and order are in a sorry state, the banks can face difficulties in sending their recovery agents for the borrowers who refuse to repay the loans. Then there are many remote areas where commuting itself is a big hassle and also expensive. So, the cons outweigh the pros and the bank may put the PIN codes of these areas in the blacklist.
Many banks keep separate lists of the PIN codes so that a different loan process is followed depending on the list on which a particular PIN code is mentioned.

Image Source