Big Decision: CIBIL Score not necessary for Education Loan

In a significant development aimed at facilitating the loan disbursement process, the Kerala High Court made a crucial ruling on Tuesday. It stated that banks should not reject education loan applications from students solely based on their poor CIBIL score.

During the hearing of the petition filed by the student, Kunhikrishnan, Justice P.V. expressed his view, stating,

“The bank should not reject the education loan application simply because the student has a low CIBIL score.”

Must be able to Repay Loan

The petitioner, a student, had taken two loans, one of which had an overdue amount of Rs 16,667, while the other loan was written off by the bank.

Consequently, the petitioner’s CIBIL score was negatively affected.

The petitioner’s counsel emphasized that without immediate funds, the petitioner would face difficulties.

The lawyers argued that the unsatisfactory credit score of the student’s parents should not be a valid reason to deny an educational loan.

They emphasized that the student’s repayment capacity would improve after completing education.

Additionally, the petitioner had received a job offer from a multinational company, ensuring the ability to repay the entire loan amount.

Arguments by the Defendants’ Lawyers

On the other hand, the respondents’ counsel argued against granting an interim order in favor of the relief sought by the petitioner, citing the Reserve Bank of India’s guidelines set forth by the Indian Banks’ Association.

They further contended that the Credit Information Companies Act, 2005, the Credit Information Companies Rules, 2006, and circulars issued by the State Bank of India prohibit loan disbursement in the present petitioner’s case.

Final Court Verdict

Despite these arguments, the court directed the respondents to immediately disburse an amount of Rs 4,07,200 to the petitioner’s college.

The court took into consideration the fact that the petitioner had received a job offer, stating that while banks may focus on technicalities, the court cannot ignore the ground reality.


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