Dilha Jan Govindan Vs State Bank of India (Kerala High Court)
Kerala HC Upholds Rejection of Education Loan Based on Parent’s Low Credit Score, Permits Fresh Consideration with Eligible Co-Borrower
The Kerala High Court considered a batch of writ petitions filed by students pursuing different courses who challenged the refusal of banks to grant education loans on the ground that the credit score or credit report of the co-borrower, being one of the parents, was unsatisfactory. The principal relief sought was a direction to the banks to grant education loans without considering the parents’ credit scores. Since the issues raised were common, the petitions were heard together. State Bank of India was the respondent bank in all petitions except one, in which Indian Bank was the respondent.
The petitioners submitted that denial of education loans based on the co-borrower’s credit score was illegal. They argued that repayment depended upon the student’s earning capacity after completion of education and that denying loans to meritorious students lacking financial resources defeated the objectives of the Model Educational Loan Scheme formulated by the Indian Banks’ Association (IBA). One petitioner additionally relied upon the Credit Guarantee Fund Scheme for Educational Loans (CGFSEL), contending that the Central Government’s guarantee in cases of default made the credit score of the borrower or co-borrower irrelevant. The petitioners also relied on earlier decisions of the High Court and contended that refusal of loans violated Articles 14 and 41 of the Constitution of India.
