Understanding CIBIL Score

The Credit Information Bureau (India) Limited (CIBIL) score is a three-digit numeric representation of an individual's credit history. It encapsulates the person's credit payment history across different loan types and credit institutions over a period of time.

To know more about CIBIL score, refer to the linked article.

Insights from the Court's Observation on CIBIL Score

• The Kerala High Court made a critical observation that a student's credit score should not be a determinant in the decision of an education loan application.
• In the case of KM George vs The Branch Manager , the court stated that the decision to reject the student’s loan application due to a deficiency in his father’s credit score was arbitrary and against the spirit of the circular issued by the Reserve Bank of India.
• Despite the student receiving a scholarship from his university for the first two semesters on account of his academic merit, the court noted that the bank failed to assess the student’s repayment potential based on his course’s prospects and his future earning capabilities. This resulted in the student losing the opportunity to pursue his studies.

RBI's Stance on Educational Loans

The Reserve Bank of India (RBI) in April 2001, released a circular mentioning a comprehensive "model educational loan scheme" prepared by the Indian Banks Association (IBA) for implementation by all banks.

• The primary objective of this scheme was to extend financial support from the banking system to deserving students seeking higher education in India and abroad. This scheme was further highlighted in the Union Budget for 2001–2002.
• Though the scheme offered broad guidelines for banks to operationalize education loans, its implementation varied across banks.