Education loan cannot be rejected due to low CIBIL scores by banks: Kerala High Court
Kerala High Court demands a more humanitarian approach towards education loans. Emphasizes it's important not to focus on low CIBIL scores.
In May, Kerala released a new rule, in which education loans cannot be rejected on the basis of low CIBIL scores by lenders. The court emphasised the need for a more empathetic approach.
Justice P.V. Kunhikrishnan emphasised that students deserve a better treatment. “Students are the nation-builders of tomorrow. They have to lead this country in future. Simply because, there is a low CIBIL score for a student, who is an an applicant for an education loan”, the education loan application ought not to have been rejected by the bank,” the court said.
A petition was filed by a student availed who had two loans. One of the loans were written off by the bank, while one was overdue for Rs 16,667, leading to a low CIBIL score. The entire loan amount of the student was cleared as he was offered a job in Oman. “Here is a case where the petitioner obtained a job offer too. Banks may be hyper-technical, but a court of law can not ignore the ground realities,” the Court observed.
Banks find themselves in a difficult situation due to this ruling, as education loans have a track record of underperforming in the banking system. This can be attributed primarily to factors like the lack of collateral, the moratorium on interest repayment until the completion of the course, and in many instances, parents being unable to repay the loan.
