The Kerala High Court has declared that education loan applications cannot be dismissed solely on the grounds of a low CIBIL (Credit Information Bureau Limited) score. Justice P.V. Kunhikrishnan emphasized the importance of a humanitarian approach by banks when considering loan applications, recognizing students as the future builders of the nation.
The ruling came in response to a petition filed by a student who had previously availed two loans, with one loan in arrears amounting to Rs. 16,667 and the other written off by the bank. Due to these circumstances, the petitioner’s CIBIL score was adversely affected. The petitioner’s counsels argued that the immediate receipt of the loan amount was crucial to the student’s well-being. They cited a previous court decision in Pranav S.R. v. The Branch Manager & Anr. (2020), which held that unsatisfactory credit scores of a student’s parents should not be a basis for rejecting an educational loan. The repayment capacity of the student after completing their education should be the determining factor, according to the scheme.
In response, the respondents’ counsels contended that granting an interim order, as requested by the petitioner, would contradict the scheme formulated by the Indian Banks Association under the guidance of the Reserve Bank of India. They further argued that the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006, and the Circulars issued by the State Bank of India prohibited loan disbursement in situations similar to the petitioner’s.
After considering the facts and noting that the petitioner had secured a job offer in Oman, the Court concluded that the balance of convenience favored the petitioner. The rejection of the education loan based solely on the low CIBIL score was deemed unwarranted. The Court directed the respondents to immediately disburse the amount of Rs. 4,07,200 to the petitioner’s college.
Additionally, the Court allowed the respondents to file a counter affidavit and petition for an early hearing of the writ petition, leaving all their contentions open. The Registry was instructed to schedule the hearing if such a petition were filed.
The case, titled “Noel Paul Fredy v. State Bank of India & Anr.,” was represented by Senior Advocate George Poonthottam, along with Advocates Nisha George and Ann Maria Francis. The respondents were represented by the Standing Counsel for SBI Jithesh Menon, Senior Advocate K.K. Chandran Pillai, and Advocate Ambily S.
