Kerala High Court (Photo| A Sanesh/EPS)
KOCHI: The Kerala High Court has observed that banks denying educational loans to students citing low credit rating of parents defeated the very purpose of such facilities. Nationalised banks and scheduled banks would not be justified in framing conditions such as the CIBIL score of co-borrowers or parents for sanctioning priority sector loans, the court said. Two students, Kiran David and Gayathry V S, approached the court against the rejection of applications for educational loan by the State Bank of India (SBI).
Look at projected future earnings of students: HC
Opposing the plea, the bank submitted that SBI’s educational loan policy was that the loan would be sanctioned jointly in the name of the student and their parents. The parent would be a co-borrower in the loan. The bank has to ensure that the co-borrower has the necessary credit discipline.
Justice N Nagaresh, citing a Supreme Court verdict, said, “The repayment possibilities are to be decided not on the financial position of the parents but solely on the projected future earnings of the students on employment after education.”
The court directed the bank to reconsider the loan applications disregarding the low credit score of the co-borrowers and sanction and disburse eligible loan amount, if the petitioners are otherwise eligible, within a month. The court said when the banks disburse loans as priority sector loans, the eligibility criteria fixed for sanction of such loans should necessarily have a nexus with the object sought to be achieved.
With a view to enabling poor and middle-class students to pursue higher education of their choice without any constraint of funds, a scheme was provided by the Union government to ensure that no student misses out on higher education for lack of funds. India to ensure that no student misses out on higher education for lack of funds.