HC pulls up bank for rejecting students' education loan

The Madras High Court has pulled up a nationalised bank for rejecting education loan applications of students on "flimsy grounds" and warned that such action was wilful disobedience of various court orders passed earlier.

Justice M S Ramesh of the Madurai bench, yesterday while allowing a petition filed by a law student, Hariharasudhan, seeking to direct Indian Bank to sanction education loan, said courts by various orders had restricted the scope for refusal to entertain students' loan application on "flimsy grounds".

The judge directed the bank to consider the plea of the petitioner for sanction of Rs 70,000 education loan for 2017-18 within two weeks.

In this case, the bank had raised queries in the form of clarification, calling upon the student to explain his one-year delay in admission and by placing the reliance on the CIBIL report of the petitioner's father, he said.

CIBIL scores are considered by several lenders to be the benchmark for granting a loan to a person.

The petitioner was the principal borrower and the status of parents or guarantor cannot be a factor for rejection of education loan application, the judge observed.

The judge said it was unfortunate that though this court had ordered in 2011 that CIBIL report should not be the basis for the rejection of education loan, financial institutions are continuing to reject the applications of this nature on similar grounds.

Justice Ramesh said rejection on the ground that the CIBIL report of the petitioner's family members was not proper and added the bank was not justified in seeking for an explanation for his delayed admission.

The petitioner had passed plus two (Class 12) examinations in 2016, but chose to join the law course in 2017-18 and the bank had sought an explanation for the same.

"I am constrained to observe that nationalised banks have been time and again rejecting applications on the ground that CIBIL report of the applicant's family members were quoted as disqualification," the judge said.

He also said such reasoning would amount to wilful disobedience of the various orders of the courts being passed and for which the nationalised bank concerned would be liable for contempt of this court's orders.

Ramesh directed Indian Bank's head office to issue necessary directions to all branches in the state to refrain from rejecting education loan applications on the said ground.