Kerala High Court
Gayathry V.S vs The Branch Manager on 2 March, 2022
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
WEDNESDAY, THE 2ND DAY OF MARCH 2022/11TH PHALGUNA, 1943
WP(C) NO. 3646 OF 2022
PETITIONER:
KIRAN DAVID
AGED 22 YEARS
S/O SUNIL DAVID, THALIYATH HOUSE,
PATHARAM P O, KOLLAM DISTRICT-690522.
BY ADVS.
MANOJ RAMASWAMY
JOLIMA GEORGE
JISHA SASI
C.B.SABEELA
APARNA G.
CHINNU ROSE MARY THOMAS
RESPONDENTS:
1 THE ASSISTANT GENERAL MANAGER
STATE BANK OF INDIA, HEAD OFFICE,
POOJAPPURA, THIRUVANANTHAPURAM-695012.
2 THE MANAGER
THE STATE BANK OF INDIA, SOORANAD BRANCH,
SOORANAD P O, KOLLAM DISTRICT-690522.
BY ADVS.
JAWAHAR JOSE
CISSY MATHEWS
EDWIN JOSEPH
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 02.03.2022, ALONG WITH WP(C).4821/2022, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C) Nos.3646 & 4821 of 2022
:2:
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
WEDNESDAY, THE 2ND DAY OF MARCH 2022/11TH PHALGUNA, 1943
WP(C) NO. 4821 OF 2022
PETITIONER:
GAYATHRY V.S.
AGED 22 YEARS
D/O SURESHKUMAR V K, KEERANKARA PUTHENPURAYIL
HOUSE, KEEZHMAD, THOTTUMUKHAM P O, ALUVA,
ERNAKULAM DISTRICT, PIN-683105.
BY ADV O.D.SIVADAS
RESPONDENT:
THE BRANCH MANAGER
STATE BANK OF INDIA, KEEZHMAD BRANCH,
MUNDOKUDY BUILDING, KUTTAMASSERY,
THOTTUMUGHKOM P O, ALUVA,
ERNAKULAM DISTRICT, PIN-683105.
BY ADV. JAWAHAR JOSE
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR
ADMISSION ON 02.03.2022, ALONG WITH WP(C).3646/2022, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
W.P.(C) Nos.3646 & 4821 of 2022
:3:
[CR]
N. NAGARESH, J.
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W.P.(C) Nos.3646 and 4821 of 2022
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Dated this the 2nd day of March, 2022
JUDGMENT
~~~~~~~~~
The petitioners are aggrieved by the denial of
education loan. The petitioner in W.P.(C) No.3646/2022
wanted to study Post Graduate Diploma in Management
(Securities Market) in the National Institute of Securities
Markets (NISM), Navi Mumbai. The petitioner submitted
Ext.P1 application for education loan of ₹7,30,000/- to the 2 nd
respondent-Manager of State Bank of India. The petitioner
had submitted all documents required by the Bank in support
of the application. The Bank, however, rejected the loan
application submitted by the petitioner. The 2 nd respondent
W.P.(C) Nos.3646 & 4821 of 2022
rejected the application for education loan for the reason that
the CIBIL score of the co-applicant is not up to the mark. The
petitioner challenges Ext.P6 communication and seeks to
direct the 2nd respondent to process his loan application.
2. The petitioner in W.P.(C) No.4821/2022 wanted to
study MBA in Happy Valley Business School, Coimbatore,
affiliated to Annamalai University, Chennai. The petitioner
submitted application for sanction of education loan of an
amount of ₹3,96,000/- from the respondent-Branch Manager
of the State Bank of India. The petitioner submitted all the
requisite documents in support of her application. The
respondent, however, issued Ext.P5 letter stating that the
CIBIL score of the co-borrower is less than 685. The
petitioner was required to resubmit the application with a
co-borrower of satisfactory credit history.
3. The petitioners state that the Reserve Bank of
India had affirmed that education loan is a futuristic loan and
the aim of the educational assistance is for providing
financial support from the banking system to
W.P.(C) Nos.3646 & 4821 of 2022
deserving/meritorious students for pursuing higher education
in India and abroad. Rejection of the loan application
submitted by the petitioners goes against the mandate given
by the Reserve Bank of India through their various Circulars.
4. The petitioners contended that this Court
considered the issue of denial of educational loan on the
basis of low credit score of the guarantors. This Court in
Pranav S.R. v. The Branch Manager, State Bank of India
and another [2020 KHC 4695] held that unsatisfactory credit
scores of the parents of the petitioner cannot be a ground to
reject an educational loan application in view of the fact that
the repayment capacity of the petitioner after his education
should be the deciding factor. Therefore, the respondents
are compellable to sanction and disburse the educational
loan applied for by the petitioners.
5. The respondents vehemently opposed the writ
petition. The respondent-Bank submitted that the educational
loan policy of the State Bank of India is that the loan would
be sanctioned jointly in the name of the student and his/her
W.P.(C) Nos.3646 & 4821 of 2022
parents/guardians. The parent/guardian would be a
co-borrower in the loan. The Bank has to ensure that the
co-borrower has necessary credit discipline. The Bank has
the prerogative to depend upon the Credit Information
Report.
6. The respondent stated that Ext.R2(a) Circular
dated 27.06.2014 issued by the Reserve Bank of India
requires that banks/financial institutions should include in
their credit appraisal process/loan policies, suitable
provisions for obtaining Credit Information Reports from one
or more of the Credit Information Companies so that the
credit decisions are based on information available in the
system. The Bank processed the application submitted by
the petitioners and it was found that the credit history of
co-borrowers is not up to the mark.
7. The educational loans, along with instalment and
leases, and small business facilities and commitments, are
classified as retail loans as per Ext.R2(b) Circular issued by
the Reserve Bank of India, contended the respondents.
W.P.(C) Nos.3646 & 4821 of 2022
Consequently, in Ext.R2(c) Master Circular dated 20.03.2021
issued by the State Bank of India, it was provided that
Borrower/Co-borrower/Guarantor should not have any
adverse credit history. In case of secured loans, CIBIL Score
should be -1 or more than 591 and in the case of unsecured
loans, CIBIL Score should be -1 or more than 685.
8. The learned counsel for the respondents argued
that the judgment of this Court in Pranav S.R. (Supra) was
delivered on the basis of the Model Scheme framed by the
Indian Banks Association and this Court had no opportunity
to analyse Exts.R2(a) and R2(b) Circulars of the RBI and
Ext.R2(c) Master Circular issued by the SBI based on the
Circulars of the RBI. Relying on the judgment of the Hon'ble
Apex Court in ICICI Bank Limited v. Official Liquidator of
APS Star Industries Limited and others [(2010) 10 SCC 1],
the learned Standing Counsel argued that the Circulars
issued by the RBI have statutory force. The Standing
Counsel also relied on the judgment in Annamalai
University represented by Registrar v. Secretary to
W.P.(C) Nos.3646 & 4821 of 2022
Government, Information and Tourism Department and
others [(2009) 4 SCC 590] and urged that the Circulars and
Guidelines of the RBI have the status of subordinate
legislation.
9. When a judgment is delivered without adverting to
such statutory instruments, such judgment should be treated
as per incuriam, contended the Standing Counsel, relying on
the judgment in Dr. Shah Faesal and others v. Union of
India and another [2020 (4) SCC 1]. In W.P.(C) No.14236
of 2021, this Court directed the student to substitute the
Co-obligant with one having sufficient credit score, in order to
avail educational loan, pointed out the Standing Counsel.
10. In Kasaragod Co-operative Educational
Society Ltd. No.C.904 v. Registrar of Co-operative
Societies (General), Thiruvananthapuram and others
[2016 (3) KHC 630], this Court has held that writ petition is
not the remedy when a Co-operative Bank denies loan,
contended the petitioner.
W.P.(C) Nos.3646 & 4821 of 2022
11. I have heard the learned counsel for the
petitioners and the learned Standing Counsel representing
the Bank.
12. The applications submitted by the petitioners for
educational loan have been rejected by the Bank for the
reason that the parents / co-applicants do not have the
requisite credit score. This Court in Pranav S.R. (Supra) has
held that unsatisfactory credit scores of parents cannot be a
ground to reject an educational loan in view of the fact that
the repayment capacity of the student after his education
should be the deciding factor as per the Circulars issued by
the Indian Banks Association.
13. The respondents argue that the judgment in
Pranav S.R. (Supra) was delivered by this Court, based on
Circulars issued by the Indian Banks Association and this
Court had no opportunity to read Exts.R2(a) and R2(b)
Circulars issued by the RBI, which have statutory support as
those are issued in exercise of the powers under Section
35A of the Banking Regulation Act. The fact that Banks are
W.P.(C) Nos.3646 & 4821 of 2022
bound by the Circulars issued by the RBI, is not in dispute.
The question is whether Exts.R2(a) and R2(b) would be
applicable to the educational loans in issue.
14. Ext.R2(a) Circular dated 27.06.2014 has been
issued in the context of providing a Data Format for
furnishing of Credit Information to Credit Information
Companies. Paragraph 2(ii) of Ext.R2(a) Circular is as
follows:
Credit Information Reports (CIRs) / Credit
Bureau Usage in all Lending Decision and
Account Opening : Banks / FIs should include in
their credit appraisal processes/loan policies,
suitable provisions for obtaining CIRs from one or
more CICs so that the credit decisions are based on
information available in the system. In this context,
as commercial borrowers' data is not adequately
populated with the CICs, to start with, banks/FIs
may institute board approved policies for credit
bureau usage in all lending decisions and account
opening to retail borrowers/consumer borrower
segment.
Ext.R2(a) provides that Banks should include in their credit
appraisal processes/loan policies, suitable provisions for
obtaining CIRs from one or more CICs. A reading of
W.P.(C) Nos.3646 & 4821 of 2022
paragraph 2(ii) quoted would indicate that the Circular is
primarily intended to apply commercial borrowers. Though
the paragraph states that the Banks may institute Board
approved policies for credit bureau for all lending decisions
and account opening to retail borrowers and consumer
borrower segment, it is evident that the loan policies in this
regard should be "suitable" so as to take credit decisions on
the basis of information available in the system.
15. Ext.R2(b) Guidelines have been issued by the RBI
for the purpose of maintaining Accounting Standards. In the
said context, the Guidelines proceed to state that the term
'Retail Banking' would take in student and educational loans.
But, the educational loans provided by the Banks in India
under Vidya Lakshmi Scheme, stand on a different footing.
India is one of the youngest nations in the world with more
than 54% of the total population below 25 years of age. Yet,
less than 5% of potential workforce in India gets formal skill
training to be employable and stay employable.
W.P.(C) Nos.3646 & 4821 of 2022
16. With a view to enable poor and middle class
students to pursue higher education of their choice without
any constraint of funds, a Scheme was provided by the
Government of India to ensure that no student misses out on
higher education for lack of funds. Vidya Lakshmi Portal for
students seeking Education Loan has been developed under
the guidance of Department of Financial Services, (Ministry
of Finance), Department of Higher Education (Ministry of
Education) and Indian Banks Association (IBA).
17. In exercise of the powers conferred by Sections 21
and 35A read with Section 56 of the Banking Regulation Act,
1949, the Reserve Bank of India, in public interest, has
issued Reserve Bank of India (Priority Sector Lending-
Targets and Classification) Directions, 2020. Direction 4
contained therein categorises Education as a priority sector.
Direction 11 states that Loans to individuals for educational
purposes, including vocational courses, not exceeding ₹20
lakhs will be considered as eligible for priority sector
classification.
W.P.(C) Nos.3646 & 4821 of 2022
18. The Banks including the nationalised Banks are
within their competence to sanction student/education loans
dehors any special Scheme framed by the Government or
RBI. But, 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. The Nationalised Banks and Scheduled Banks will
not be justified in framing conditions for sanctioning of such
priority sector loans so as to defeat the very purpose of grant
of such loans.
19. The judgment in Kasaragod Co-operative
Educational Society Limited (supra) was a case involving
denial of a commercial loan and hence will not apply to the
facts of the case. In view of my finding that Exts.R2(a) and
R2(b) do not apply to the facts of these writ petitions, the
judgments of the Hon'ble Apex Court in ICICI Bank Limited
(Supra) and Annamalai University (Supra) will not be of any
assistance to the respondents.
W.P.(C) Nos.3646 & 4821 of 2022
20. This Court in the judgment in Pranav S.R. (Supra)
has held that for educational loans, 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. In view of the facts
and reasons stated above, I find no reason to take a different
view in the matter.
The writ petitions are therefore allowed. The
respondents are directed to reconsider the loan applications
submitted by the petitioners, disregarding the low Credit
Score of the co-obligants, if any, and sanction and disburse
eligible loan amount, if the petitioners are otherwise eligible,
within a period of one month.
Sd/-
N. NAGARESH, JUDGE
aks/26.02.2022
W.P.(C) Nos.3646 & 4821 of 2022
APPENDIX OF WP(C) 3646/2022
PETITIONER'S EXHIBITS
Exhibit P1 TRUE COPY OF THE APPLICATION FORM
SUBMITTED BY THE PETITIONER.
Exhibit P2 TRUE COPY OF THE OFFER LETTER DATED
10.06.2021 ISSUED BY THE NATIONAL
INSTITUTE OF SECURITIES MARKETS (NISM)
TO THE PETITIONER.
Exhibit P3 TRUE COPY OF THE CERTIFICATE DATED
26.11.2021 ISSUED BY THE NATIONAL
INSTITUTE OF SECURITIES MARKETS
(NISM).
Exhibit P4 TRUE COPY OF THE FEE STRUCTURE OF PGDM
(SM) 2021-2023 OF NATIONAL INSTITUTE
OF SECURITIES MARKETS.
Exhibit P5 TRUE COPY OF THE LETTER VIDE NO.PLGEA-
F2/4/2022-PLGEA DATED 25.01.2022.
Exhibit P6 TRUE COPY OF THE EMAIL LETTER DATED
28.01.2022 ISSUED BY THE 2ND
RESPONDENT.
RESPONDENT'S EXTS:
R2(a) COPY OF CIRCULAR DT 27.6.2014 ISSUED BY RBI.
R2(b) COPY OF CIRCULAR DT 18.4.2007 ISSUED BY RBI
R2(c) COPY OF RELEVANT PAGES OF CIRCULAR DT 20.3.2021
ISSUED BY SBI
R2(D) COPY OF CIRCULAR DT 17.1.2018 ISSUED BY SBI
R2(e) COPY OF CHART SHOWING THE PERFORMANCE OF
EDUCATIONAL LOAN AS ON DECEMBER, 2020.
R2(f) COPY OF RELEVANT PAGES OF CIRCULAR DT 4.9.2020
ISSUED BY RBI.
W.P.(C) Nos.3646 & 4821 of 2022
APPENDIX OF WP(C) 4821/2022
PETITIONER'S EXHIBITS
Exhibit P1 TRUE COPY OF THE FEES AND EXPENDITURE
STATEMENT ISSUED BY HAPPY VALLEY
BUSINESS SCHOOL COIMBATORE DATED
01.10.20210
Exhibit P2 TRUE COPY OF THE LOAN APPLICATION
SUBMITTED BY THE PETITIONER.
Exhibit P3 TRUE COPY OF THE NATIVITY CERTIFICATE
OF THE PETITIONER DATED 19.01.2022
ISSUED FROM THE KEEZHMAD VILLAGE.
Exhibit P4 TRUE COPY OF THE INCOME TAX
CERTIFICATE OF THE PETITIONER DATED
2.1.2022M ISSUED FROM THE KEEZHMAD
VILLAGE.
Exhibit P5 TRUE COPY OF THE LETTER DATED 8.2.2022
ISSUED BY THE STATE BANK OF INDIA,
KEEZHMAD BRANCH.
