The State Bank of India was directed by the High Court of Calcutta on Friday, 1st April, 2022 to process the education loan of a third year law student who had applied for the same under the “West Bengal Credit Card Scheme”, provided by the State Government on June 20,2021.
The West Bengal Student Credit Card Scheme was framed by the State Higher Education Department for providing Credit Cards to students for pursuing higher education.
Justice Moushumi Bhattacharya was adjudicating upon a plea moved by Irina Mullick, a third year law student whose loan application of Rs. 2,50,000 was rejected by the SBI because of the low CIBIL score of her father. CIBIL is a measure of the credit- worthiness of an applicant.
In 2019, the petitioner requested for a Student Credit Card Scheme student loan to continue her undergraduate studies at the concerned Law School. However, due to the petitioner's father's low CIBIL (Credit Information Bureau India Limited) score, her loan application was refused by SBI in a letter dated March 17, 2022.
REASONS FOR REJECTION OF LOAN:
The petitioner's father was a co-borrower of the loan, according to the SBI's lawyer, and the bank was forced to reject the loan due to the petitioner's father's poor CIBIL score. It was also claimed that the petitioner was unable to reapply for the loan with her mother as a co-borrower since the relevant site would not allow for a second application.
The lawyer for Transunion CIBIL informed the Court that the poor score was based on information from several member-Banks and that the petitioner's father owed Rs. 2,73,571 as of February 28, 2022.
The State government's counsel, on the other hand, provided other email addresses that would allow the petitioner to apply for the loan with her mother as a co-borrower.
OBSERVATION OF THE COURT:
After the hearings, it was observed by the Court that the loan was rejected by the SBI on the basis of the Rules of the Scheme and the low CIBIL score of the petitioner's father.
It was further noted that Rule 8(b) of the Scheme provides that "The Banks will not insist on any security/collateral security in tangible/intangible form other than co- obligation of the parents/Legal guardians" and that the State Government will enter into an agreement with the banks separately in this regard.
PURPOSE OF THE SCHEME:
The Court observed that the purpose of an education loan as framed by the Scheme is to give needy students a chance to pursue their education despite financial challenges. It was further opined that the State government scheme must take into account the financial contingencies faced by students facilitate granting of the loan on easy terms.
The Court also observed that -
"The West Bengal Students Credit Card Scheme seeks precisely to address this issue which would be evident from the object of the Scheme which is to facilitate the availability of necessary funds for higher studies. The State Government proposes to support the students by providing them with Credit Cards needed to fund their studies.”
CHANGES NEEDED IN THE SCHEME:
Justice Bhattacharya opined that there are few areas which the State government should immediately address in order to make the Scheme more effective. Highlighting concerns such as an inoperative portal for second time applications and the absence of a parent as a co-borrower, the Court remarked,
“First, the complaint with regard to the portal being inoperative for a second-time application is inconsistent with the Scheme which should be user friendly. Second, there are several inconsistencies in the Scheme with regard to the right of a student to avail of the loan either in his/her personal capacity or with the parent as a co-borrower. The inconsistencies would be evident from Rules 6, 8 and 13 of the Scheme. For instance, what happens if a student does not have a parent to act as a co-borrower? Would an orphan or a destitute be excluded from the Scheme?"
ROLE OF BANKS
The Court further noted that banks should also consider low-risk areas, such as the present case, where the loan amount is only Rs. 2,50,000. The requirement of the financial cover should be commensurate to the amount of the loan, it was stated further.
Granting liberty to the petitioner to make a fresh loan application vide the alternative email IDs provided by the State government, the Court opined,
“The petitioner has only managed to pay for the 1st Semester and the substantial amount remains outstanding to the College for the last two years. The petitioner shall hence be at liberty of availing of the alternative email IDs provided by counsel for the State and make the necessary application for the Education Loan under the Scheme.”
ORDER OF THE COURT:
The Court held that the State government should ensure that no student in need of money is compelled to sacrifice his or her education, the Court underscored,
"The State Government is thus requested to ensure that no student who is in need of money, is forced to sacrifice his/her education or future career aspirations for want of timely financial intervention."
Directing the petitioner to make a fresh loan application under the State government scheme, the Court ordered SBI to process such an application within 2 weeks thereafter.
“The SBI is directed to process the loan within two weeks from the date the application made by the petitioner. The SBI shall also provide necessary assistance to the petitioner in this regard. Needless to say, the loan application shall be processed under the relevant Rules. The Bank shall be at liberty of seeking clarification from the Higher Educational Department of the State if the need arises", the Court ordered further.