Education Loan Cannot Be Rejected For Low CIBIL Score Of Student: Kerala High Court

The Kerala High Court on Tuesday held that an application for education loan by a student could not be rejected on the ground of a low CIBIL (Credit Information Bureau (India) Limited) score. 

Justice P.V. Kunhikrishnan cautioned banks to adopt a 'humanitarian approach' while considering applications for education loans. 

"Students are the nation builders of tomorrow. They have to lead this country in future. Simply because, there is low CIBIL score to a student, who is an applicant for Education loan, I am of the considered opinion that, Education loan application ought not have been rejected by Bank," the Court observed. 

The petitioner in this case, who is a student, had availed two loans, of which one was overdue for Rs.16,667/-, and the other loan was written off by the Bank. The CIBIL score of the petitioner was low due to these reasons. It was submitted by the counsels for the petitioner that unless the amount was received immediately, the petitioner would be in trouble. The counsels placed reliance upon the decision in Pranav S.R. v. The Branch Manager & Anr. (2020), wherein the Court had held that the unsatisfactory credit score of the parents of a student could not be a ground for rejecting an educational loan, since the repayment capacity of the student after his education ought to be the deciding factor as per the scheme. The counsels in this case averred that the petitioner had received a job offer from a Multi National Company and would thus be able to clear the entire loan amount. 

On the other hand, the counsels for the respondents argued that granting an interim order in this case, in accordance with the reliefs sought for by the petitioner, would be against the scheme framed by the Indian Banks Association as directed by the Reserve Bank of India. It was further submitted that the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006 and the Circulars issued by the State Bank of India prohibits disbursement of loan in situations as that of the present petitioner. 

The Court, on noting the factual circumstances, and the fact that the petitioner had obtained a job in Oman, was of the considered opinion that the balance of convenience would be in favour of the petitioner, and that the application for the education loan ought not to have been rejected only on ground of the low CIBIL score. 

"Here is a case, where the petitioner obtained a job offer too. Banks may be hyper technical, but a court of law can not ignore the ground realities," the Court observed, while directing the respondents to disburse the amount of Rs.4,07,200/- to the College of the petitioner forthwith. 

The Court added that all the contentions of the respondents would be left open and that they would be free to file a counter affidavit and could also file a petition for early hearing of the present writ petition. It directed the Registry to post the present writ petition for hearing in the event of such petition being filed. 

The petitioner was represented by Senior Advocate George Poonthottam, and Advocates Nisha George, and Ann Maria Francis. The Standing Counsel for SBI Jithesh Menon, Senior Advocate K.K. Chandran Pillai, and Advocate Ambily S. appeared on behalf of the respondents. 

Case Title: Noel Paul Fredy v. State Bank of India & Anr. 

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