Low CIBIL Score Excuse Can’t Be Used To Reject Education Loan of a Student: Kerala HC
Moneylife Digital Team 31 May 2023
In a significant decision, while cautioning banks to adopt a humanitarian approach, the Kerala High Court (HC) ruled that an education loan cannot be rejected due to the low credit score of the applicant student. 
In an order, the bench of justice PV Kunhikrishnan observed, "While considering an 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. Simply because there is a low Credit Information Bureau (India) Ltd (CIBIL) score for a student, who is an applicant for an education loan, I am of the considered opinion that an education loan application ought not to have been rejected by the bank."
When a student applied for an education loan of Rs4.07 lakh from the State Bank of India (SBI), his application was rejected by SBI, citing a CIBIL score of 560. He had availed two loans. While one loan was overdue for Rs16,667, the other loan was written off by the Bank, due to which he has a low credit score.
The counsel for SBI contended that the Credit Information Companies Act and the rules and the circulars issued by the SBI prohibit disbursement of loans in such situations. 
However, the counsel for the student submitted that unless the loan amount is disbursed immediately, the student will be in trouble financially. He also stated that the student had received an offer for a job in a multinational company in Oman and, thus, would be able to clear the entire loan. 
After hearing both sides, justice Kunhikrishnan stated, "Banks may be hyper-technical, but a court of law cannot ignore the ground realities. Therefore, I am of the considered opinion that SBI should disburse the loan to the college of the student forthwith."
He then directed SBI to disburse the education loan of Rs4.07 lakh to the student's college.
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