Bank can’t refuse education loan due to low CIBIL score of student, says High Court

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In a significant ruling, the Kerala High Court (HC) has emphasized the importance of a humanitarian approach by banks and declared that an education loan cannot be rejected solely based on the applicant student’s low credit score.

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Justice PV Kunhikrishnan, presiding over the case, emphasized the role of students as future nation-builders and urged banks to consider this perspective while evaluating education loan applications. The court stated, “I am of the considered opinion that an education loan application should not have been rejected by the bank simply due to a low Credit Information Bureau (India) Ltd (CIBIL) score of the student, who is the applicant.”

The case involved a student who had applied for an education loan of Rs 4.07 lakh from the State Bank of India (SBI), but the application was rejected on the grounds of a CIBIL score of 560. The student had previously taken two loans, with one loan having an overdue amount of Rs 16,667 and the other loan being written off by the bank, leading to a low credit score.

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The counsel representing SBI argued that the Credit Information Companies Act, along with the bank’s rules and circulars, prohibited loan disbursement in such circumstances. Conversely, the student’s counsel highlighted the urgent financial need and the student’s job offer from a multinational company in Oman, assuring the court that the entire loan would be repaid.

After hearing the arguments from both sides, Justice Kunhikrishnan acknowledged the technicalities employed by banks but emphasized that the court cannot overlook the ground realities. Consequently, the court directed SBI to immediately disburse the education loan of Rs 4.07 lakh to the student’s college, recognizing the urgent financial requirement.

Overall, the Kerala High Court’s ruling underscores the significance of taking a compassionate approach while considering education loan applications and aims to ensure that deserving students are not deprived of educational opportunities due to low credit scores.

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