Students Are Nation Builders Of Tomorrow, Banks Should Not Reject Loan Merely On Low CIBIL Score: Kerala HC

Agreeing with certain legal contentions raised by the Bank, the bench was of the opinion that the balance of convenience, was in favour of the petitioner. “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. Here is a case, where the petitioner obtained a job offer too. Banks may be hyper technical, but a court of law cannot ignore the ground realities”, Justice P.V. Kunhikrishnan observed in the matter.

Senior Advocate George Poonthottam appeared for the petitioner and Senior Advocate K.K. Chandran Pillai appeared for the respondent.

In the pertinent matter the petitioner, a student, who is to complete his course on May 31, 2023 was denied an education loan considering a low CIBIL Score of 560.

The respondent vehemently opposed the granting of interim order stating that the petitioner availed two loans and one loan is overdue for Rs.16,667/-. Furthermore, submitted that the Bank has written off the other loan and that is why the CIBIL score is low.

Further argued that granting the interim order in the case, will be against the scheme framed by the Indian Banks Association as directed by the Reserve Bank. Also 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 such situation.

However, the petitioner submitted that he has got an offer for a job in a Multi National Company and therefore, will be able to clear the entire loan amount.

The Court relied on its previous judgment in a similar matter, where a meritorious student was denied loan based on his father’s low CIBIL Score. “It was specifically held that the rejection of the application for the deficiency in the credit score of the father of the applicant is arbitrary and violative of the spirit of the circular issued by the Reserve Bank of India”, the judgment read.

The relevant portion of the judgment referred to by the single-judge bench, further read, “The respondent Bank has not assessed the repaying possibilities on the basis of either the potential of the course the petitioner is undergoing or his future earning capabilities on completion of the course while rejecting his application and thereby denying the opportunity of the petitioner, who is a meritorious student, to pursue his studies”.

Cause Title: Noel Paul Fredy v. State Bank of India