Banks Cannot Deny Education Loan for Low CIBIL Score: Kerala High Court
Banks Cannot Deny Education Loan for Low CIBIL Score: Kerala High Court
The HC said banks may be hypertechnical, but a court of law cannot ignore the ground realities

The Kerala High Court on Tuesday ruled that banks cannot deny education loans to students solely on the basis of their low CIBIL score.

The single-judge bench of Justice PV Kunhikrishnan remarked that students are the nation-builders of the future, and thus a humanitarian approach is very important from the banks.

“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 future. If there is low CIBIL score to a student, the Education loan application ought not have been rejected by Bank,” the court said.

The petitioner, Noel Paul Fredy, who is 23 years old is a student who’s completing his course on May 31. He also obtained a job in Oman. He had availed two loans. One of them is overdue for Rs, 16,667.

Senior advocate KK Chandran Pillai, appearing for the bank, submitted that the petitioner’s CIBIL score is only 560. Further, Pillai also stated that the petitioner had availed two loans and one is overdue, because of which the CIBIL score is low. Furthermore, he also opposed granting the interim order because that would be against the scheme framed by the Indian Banks’ Association as directed by the Reserve Bank.

Pillai also submitted that the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006, and the circulars issued by the State Bank of India prohibit disbursement of loan in such a situation.

Advocate George Poonthottam, appearing for the petitioner, said unless the amount was received immediately, the petitioner would be in trouble. Further, Poonthottam also stated that the petitioner has got an offer for a job in a multi-national company, and therefore he will be able to clear the entire loan amount.

Justice Kunhikrishnan noted the facts and arguments of the parties and stated that the respondents shall disburse the loan to the college of the petitioner forthwith.

The court also added that the banks may be hypertechnical, but a court of law cannot ignore the ground realities.

“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. Therefore, I am of the considered opinion that the respondents shall disburse the loan to the College of the petitioner forthwith,” the court added.

The court directed the bank to sanction and disburse the education loan of Rs. 4,07,200 to the college on behalf of the petitioner.

However, the bench also stated that the respondents are free to file a counter-affidavit.

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