A PAN card verifies your identity for financial transactions. Banks and credit card companies check your PAN details when you apply to decide if you can be trusted with a loan or credit card. PAN verification gives them confidence you are creditworthy and will repay borrowed money. That's why updating your PAN improves your chances of loan/card approval on good terms. Every taxpayer and borrower needs an accurate PAN card.
In this blog, we will explore how PAN card verification helps in loan approvals and credit card applications, its significance in financial transactions, and why it is a must-have for every taxpayer and borrower.
Understanding PAN Card and its Importance
A PAN card is a 10-digit alphanumeric identifier issued by the Income Tax Department of India under the supervision of the Central Board of Direct Taxes (CBDT). It is a unique identification number assigned to individuals, companies, and entities engaged in financial activities. PAN is permanent and remains unchanged, regardless of location or change of address within India.
Why is a PAN Card Important?
A PAN card serves as proof of identity and is required for various financial activities. The main reasons to verify PAN card are:
- Filing Income Tax Returns (ITR)
- Opening a bank account
- Applying for a loan or credit card
- Buying or selling assets beyond a specified limit
- Making high-value transactions
- Investing in mutual funds, stocks, or fixed deposits above Rs. 50,000
Among its many uses, PAN card verification recreates a key role in the loan approval process and credit card applications.
| Also Read: PAN Card Reprint Process |
How PAN Card Verification Helps in Loan Approvals
PAN card verification is simply the heart of any loan approval. Verifying PAN details can help the lender identify the applicant's creditworthiness, deny fraud, and expedite the loan processes. Undermentioned are the key ways in which PAN verification helps in the approval of loans:
1. Establishes Financial Identity
A PAN number is necessary for banks and financial institutions to check whether the applicant has a financial identity. Since a PAN is unique to the individual, it helps lenders ensure that the applicant is genuine and not trying to fool around with any fraudulent activities.
2. Assesses Creditworthiness
Creditors use PAN to scrutinise financial history and transactions developed over the years, which helps them to decide if a candidate is worthy of getting a loan. They check credit reports from credit bureaus to evaluate the borrower's repayment behaviour.
3. Prevents Tax Evasion & Fraudulent Activities
With the incorporation of PAN with bank transactions, the government and financial institutions can track all high-value transactions, preventing any sort of tax evasion and fraudulent activities by individuals. Thus, the loan process becomes transparent.
4. Facilitates Loan Eligibility Check
When applying for a loan, financial institutions verify the PAN card to check:
- Income stability
- Existing loans or credit obligations
- Tax filing history
- High-value transactions in past years
A good financial record improves loan eligibility, making it easier to get loans approved quickly.
5. Ensures Quick Loan Processing
A PAN card allows lenders to instantly verify financial details and credit history, leading to faster loan approvals. Without PAN card verification, the approval process becomes time-consuming and complex.
| Also Read: PAN for Transactions |
Why PAN Card is Essential for Credit Card Applications?
Applying for a credit card requires applicants to meet specific eligibility criteria. PAN verification is mandatory for the following reasons:
1. Mandatory for Credit Score Check
Credit card issuers check applicants' CIBIL scores and financial records. Since credit history is linked with PAN, financial institutions use PAN details to fetch credit reports and assess the applicant’s repayment capability.
2. Helps Identify Defaulters
PAN card verification helps banks identify whether an applicant has a history of loan defaults, delayed payments, or bankruptcy. This prevents banks from issuing credit cards to high-risk individuals.
3. Ensures Income Verification
A stable income is essential for obtaining a credit card. Banks verify income tax returns (ITR) using PAN details to check if the applicant has sufficient income to handle a credit card responsibly.
4. Prevents Fraudulent Credit Card Applications
By cross-checking PAN details, financial institutions can identify duplicate applications, fraud attempts, or individuals who misuse multiple credit cards for illicit purposes.
5. Facilitates Large Transactions and Limits Approval
Credit card companies determine the credit limit based on past transactions linked to the PAN. Applicants with a strong financial history are eligible for a higher credit limit.
Steps Involved in PAN Card Verification for Loans & Credit Cards
The PAN card verification process is essential for both loans and credit card applications. Understanding the sequence of steps involved can help applicants navigate the process smoothly. Here are the steps involved in verifying PAN for loans and credit cards.
1. Submission of PAN Details
When applying for a loan or credit card, the applicant provides their PAN card details along with other KYC (Know Your Customer) documents such as Aadhaar, bank statements, and income proofs.
2. Verification by Financial Institutions
Lenders use PAN to verify financial history, check tax records, and cross-check details with credit bureaus.
3. Credit Score Assessment
Using the PAN-linked credit history, banks assess the credit score and determine the applicant’s eligibility.
4. Approval or Rejection Based on Assessment
The loan or credit card is approved if the applicant has a strong financial background, good credit score, and repayment history. Otherwise, it may be rejected or issued with strict conditions.
Common Reasons for Loan or Credit Card Rejection Due to PAN Verification Issues
Although PAN card verification is crucial for loan and credit card approval, certain issues related to the verification process can lead to rejection. Some common reasons for rejection due to PAN verification discrepancies include:
1. PAN Details do not Match Records
Financial institutions may reject the application if the PAN details do not match government records.
2. Low Credit Score
A poor credit history linked to PAN leads to loan and credit card rejection.
3. Non-Filing of Income Tax Returns
If the PAN does not reflect regular tax filing, lenders may consider the applicant financially unstable, leading to loan rejection.
4. Multiple Active Loans or Credit Cards
If a person has multiple loans and high credit utilisation, the chances of approval are reduced as
banks consider them high-risk borrowers.
| Also Read: PAN Card for Easy Transactions |
Conclusion
The PAN card is one of the most important financial documents for every individual in India. It is mandatory for loans, credit card applications, high-value transactions, tax filings, and financial transparency. If you plan to apply for a loan or credit card, ensure that your PAN details are correct and linked with your bank accounts to avoid verification issues.
Maintaining a good credit history, filing regular tax returns, and ensuring accurate PAN details can increase your chances of getting loan approvals and credit card applications approved smoothly.
FAQs
1. Why is PAN card verification needed for loans and credit cards?
PAN card verification helps banks confirm your identity, check your financial history, and prevent fraud. It ensures that only eligible applicants get loans or credit cards.
2. Can I apply for a loan or credit card without a PAN card?
No, a PAN card is mandatory for loan and credit card applications. It is required to verify your financial records and check your credit score.
3. How does PAN verification affect my loan approval?
Lenders use your PAN to check your credit history, tax records, and financial transactions. A good financial record improves your chances of quick loan approval.
4. What happens if my PAN details are incorrect or don’t match records?
If your PAN details are incorrect or don’t match official records, your loan or credit card application may be delayed or rejected. Always update your PAN details if needed.
5. Does PAN verification impact my credit score?
No, PAN verification itself doesn’t impact your credit score. However, lenders use PAN to check your credit report, and a poor credit score can lead to rejection of loans or credit cards.
Written by Bruhadeeswaran R.
Bruhadeeswaran R. is a B2B content expert with 14+ years of experience, specializing in National Pension System (NPS), PAN, DPI, eSignPro, and Central KYC. As Editor and Lead Content Writer at Protean eGov Technologies, he simplifies complex e-governance topics through engaging blogs, reports, and digital content.
