The Kerala High Court recently held that a student’s application for an educational loan could not be rejected only by reason that his parents have “unsatisfactory” credit scores. Justice Anu Sivaraman declared the order for the same.
The Court directed the Bank to assess the “repayment possibilities” of the loan applied for, rather than the creditworthiness of the applicant’s parents, in its decision to extend an education loan.
Advocate B Mohanlal argued for the petitioner while Advocate Jawahar Jose represented State Bank of India.
Pranav, a 20-year-old student in a Bachelor’s degree programme filed a writ petition challenging the State Bank of India’s rejection of his education loan application. He argued that the Bank rejected his application on the ground that the credit history of the petitioner’s parents “did not permit the sanction of the educational loans.”
The Bank countered that the educational loan was being utilised to finance the applicant’s education in the “management quota” of his institution. The Bank further produced the “model loan scheme” of the Indian Banks Association and a State Bank of India’s Office Memorandum that requires an applicant’s parents’ credit scores to be considered in deciding an extension of loan.
The Court, however, rejected the Bank’s submissions that the educational loan-applicant sought to finance his studies in the “management quota” stating that there was nothing on record to prove the same. Neither the loan application nor the order of rejection made any mention of this, the Court noted.
The Court directed that the loan application be assessed per the Court’s ruling, within two weeks. Further, the credit scores of the loan-applicant’s parents were not to “be pressed into service to deny the loan”, if the loan-applicant was otherwise eligible, the judge said.
Read the order here: