Cibil scrore alone can’t decide student loan: HC

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In a bid to ease the process of loan reception and repayment for common men, both Kerala and Patna high courts have delivered rulings that have put banks in a dilemma. 

In a recent verdict, the Kerala HC decreed that banks need to adopt a humanitarian approach towards granting education loans. According to the court, a low CIBIL score should not be the sole criteria to decide whether or not one should get a study loan. 

Generally, a CIBIL score below 600 is considered low. So, if an individual scores anywhere between 300-599, there are negligent chances of getting a loan. If your score ranges between 600-750, your application could be considered, but with stringent terms and conditions in place. 

According to industry experts, education loans top bank’s NPA lists. As per 2022 data, about 8% of all education loans disbursed by 12 public sector banks turned non-performing. This exceeds even the delinquency levels of overall NPAs in the Indian banking system. As per information presented in Lok Sabha, the center has disbursed around Rs 17,688 crore worth of loans in 2022-23. However, the number of accounts these funds are sent to remain consistent at about 4 lakhs for the last 3 years. 

Worryingly, PSBs disperse about 90% of all  education loans in India. Hence, finding a fix between giving loans that do not run up a bank’s NPAs versus servicing deserving students with the money they require to study. 

Another area banks are currently worried about is a Patna HC judgment that prohibits banks to deploy recovery agents to forcefully seize cars and other motor vehicles, against which loans have been taken and not repaid. Banking experts note that they opt for this only as the last resort, or if they discover that the customer has been intentionally defaulting on his repayments.