Education Loan Application Can’t Be Rejected For Low CIBIL Score, Says Kerala HC

As a step towards giving students an easy access to education loan, the Kerala High Court has ruled that students’ education loan application cannot be rejected on the basis of low CIBIL (Credit Information Bureau (India) Limited) score. In his order Justice P.V. Kunhikrishnan ordered banks to adopt ‘humanitarian approach’ while reviewing a student’s education loan application.

Justice P.V. Kunhikrishnan emphasised that students are nation builders of tomorrow and have the responsibility to lead the country in future. As reported by Live Law, the Kerala High Court remarked “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 case is filed by a student who had availed two education loans of which one is overdue for Rs 16,667 and other one is written off by the bank. Because of the issues with earlier education loans, the CIBIL score of the petitioner was low. The counsels of the petitioner contended that unless the amount is received immediately, the petitioner will be in a trouble. The counsels relied the student’s petition on a 2020 case Pranav S.R. v. The Branch Manager and Anr. The counsels of the petitioner averred there client has received a job offer from a multi national company and would thus be able to clear the entire loan amount.

In the 2020 case, the court held that unsatisfactory credit score of the parents of a student cannot be a ground to reject the education loan application. The court cited that repayment capacity of a student after getting a job ought to be the deciding factor as per the scheme. On the other hand, respondents argued that court’s observation is against the scheme framed by the Indian Banks Association as directed by the Reserve Bank of India.

The respondent further contended that the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006 and the Circulars issued by the State Bank of India restricts disbursement of education loan in situations similar to that of petitioner. In his order Justice P.V. Kunhikrishnan ordered bank to disburse Rs 4,07,200/- to the College of the petitioner forthwith.

The Kerala High Court has left the case open and asked the financial institution to feel free to file a counter affidavit and can also ask for early hearing of the issue.