The Kerala High Court has held that educational loan cannot be rejected to a student solely on the ground of unsatisfactory credit scores of his/her parents
Justice Anu Sivaraman observed that the repayment capacity of the applicant after his education should be the deciding factor as per the relevant scheme.
Pranav, a 1st year B.Tech student in Food Technology, had applied for an education loan from SBI for pursuing his studies in an Engineering College in Tamil Nadu. His application was rejected on the ground that the CIBIL report of his father showed that there was a default in a commercial vehicle loan availed by him. Before the Court, Pranav submitted that, even after the closure of the loan, the application for education loan was declined stating that the credit history of both the parents reveal multiple default.
The Bank, in its counter affidavit, relied on model education loan scheme of the Indian Banks Association and Office Memorandum prescribing guidelines issued by the State Bank of India to contend that the credit score is liable to be taken into account where education loan is sought for prosecution of studies in management quota in colleges outside the State.
The Court, while considering this plea, referred to a recent judgment, in which it was observed that the repayment possibilities of the loan were contemplated to be made not on the financial position of the parents but solely on the projected future earnings of the students on employment after education. The court also noted that the order of rejection does not mention the loan has been rejected because the admission is in the management quota. The Court added:
"The petitioner belongs to OBC community and he is seeking the educational loan for continuing his B.Tech studies. Taking note of the findings in Exhibit P8 judgment, I am of the opinion that unsatisfactory credit scores of the parents of the petitioner cannot be a ground to reject an educational loan in view of the fact that the repayment capacity of the petitioner after his education should be the deciding factor as per clause 10 of Ext R1(a) scheme."
The court then disposed of the writ petition by directing the bank to reconsider the application for education loan within two weeks..
Case name: PRANAV S.R. vs. THE BRANCH MANAGER, STATE BANK OF INDIA,
Case no.: WP(C).No.10968 OF 2020
Coram: Justice Anu Sivaraman
Counsel: Advocates B.MOHANLAL and JAWAHAR JOSE