Application for education loan should not be rejected even if CIBIL score is low: Kerala HC

In a major move to ensure smooth process for the disbursement of loan from the financial Institutions, the The Kerala High Court on Tuesday ruled that application for education loan from the students should not be rejected by the banks simply because the CIBIL score of a student was low.

Justice P.V. Kunhikrishnan while hearing the petition filed by the student said, “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 petitioner, 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 and 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.

However the court directed the respondents to disburse the amount of Rs. 4,07,200 to the College of the petitioner forthwith. The court observed, "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."