The Kerala High Court has observed that nationalised banks and scheduled banks would not be justified in framing conditions such as CIBIL score of co-borrowers for sanctioning priority sector loans such as education loan so as to defeat the very purpose of grant of such loans.
The court made the observation while recently allowing a writ petition filed by two students against rejection of their applications by the State Bank of India for education loan on the grounds that the credit history of the co-borrowers (parents in this case) was not up to the mark.
The court pointed out that the the Reserve Bank of India (RBI), in public interest, had issued Reserve Bank of India (Priority Sector Lending Targets and Classification) Directions, 2020. In it, the direction four categorised education as a priority sector and direction 11 stated that loans to individuals for educational purposes, including vocational courses, not exceeding ₹20 lakh would be considered as eligible for priority sector classification. When 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 court added.
