Banks Should Not Deny Education Loans to Students Based on Low CIBIL Score: Kerala HC

The Kerala High Court has recently observed that banks should not deny of education loans to students based solely on their low CIBIL score.

Justice PV Kunhikrishnan acknowledged the role of students as the nation builders of tomorrow and approach for the importance of considering education loan applications with empathy.

The Court said that, “While considering Education Loan application, a humanitarian approach is necessary from the Banks. Students are the nation-builders of tomorrow.

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

The case involved a student who applied for an education loan from the State Bank of India but had his application rejected due to his CIBIL score of 560.

Senior advocate KK Chandran Pillai explained that the low CIBIL score was a result of the petitioner’s previous loans, one of which had an overdue amount of ₹16,667, and the other was written off by the bank.

Pillai argued against granting any interim order in favor of the petitioner, citing the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006, and circulars issued by the State Bank of India (SBI) that prohibited loan disbursement in such situations.

In response, Senior Advocate George Poonthottam, representing the student-petitioner, emphasized the urgency of disbursing the loan amount to prevent further difficulties for the petitioner.

Also, Poonthottam informed the Court that the petitioner had received a job offer from a multinational company and would be able to repay the loan in its entirety.

While acknowledging the legal contentions raised by Pillai, the Court determined that the balance of convenience favored the petitioner, particularly considering his job offer and the impending completion of his course on May 31, 2023.

The Court stated in its interim order that, “Here is a case, where the petitioner obtained a job offer too. Banks may be hyper-technical, but a court of law can’t ignore the ground realities. Therefore, I am of the considered opinion that the respondents shall disburse the loan to the College of the petitioner forthwith. Therefore, there will be a direction to the respondents to sanction and disburse the education loan of ₹4,07,200 to the College of the petitioner forthwith.”

The Court, however, allowed the bank to file counter affidavits or request an early hearing of the petition, ensuring both parties have a fair chance to present their arguments.