Ex-HDFC and ICICI Bank employee denied job by SBI for negative CIBIL score on loans taken for younger brother; loses legal challenge in High court

Time of India

12 hours ago

Academy
Empower your mind, elevate your skills
How did this case start?
July 27, 2020: State Bank of India issued a notification for filling up the vacancy of the Circle Based Officer (CBO) post. He (candidate) applied for this job.
State Bank of India issued a notification for filling up the vacancy of the Circle Based Officer (CBO) post. He (candidate) applied for this job. February 16, 2021: This person was successful in the examination and called for an interview.
This person was successful in the examination and called for an interview. March 12, 2021: This person, having cleared medical examination, certificate verification and CIBIL and other document verification, was issued an appointment order.
This person, having cleared medical examination, certificate verification and CIBIL and other document verification, was issued an appointment order. April 1, 2021: He was thereafter asked to submit his explanation to the CIBIL report which was based on his past records of belated repayment of loans. He submitted his explanation along with CIBIL report for all the accounts and requested the SBI to permit him to continue duty.
SBI said under Clause 14 (ii) and Clause 1(E) candidates with record of default in loan repayments can't get a job at SBI
The SBI relied on Clause 14 (ii) (General Information), Clause 16 (Disclaimer) and Clause 1(E) (Eligibility Criteria) and submitted that the petitioner (candidate) had given false and untrue declaration and hence his appointment was cancelled.
According to the SBI, one of the eligibility criteria stipulated was that the candidates with records of default in repayment of loans, adverse report of CIBIL and other external agencies were not eligible for appointment.
According to the SBI, the petitioner's CIBIL report revealed adverse credit history in repayment of loan, credit card usage and therefore, the petitioner was found ineligible under Clause 1(E) of the eligibility criteria.
When the petitioner (candidate) was asked to submit an explanation to the CIBIL report, he admitted that he availed personal loans for the purpose of his brother's business.
What did the candidate's CIBIL report say?
August 31, 2018: Personal loan obtained for Rs 1,30,000 was irregular between the period November 2018 to July 2019. During this period he was gainfully employed in ICICI Bank as Deputy Manager. The loan was written off by the credit institution and a suit was filed against the candidate for recovery of the loan. This is a clear evidence of his financial indiscipline. June 27, 2018: Personal loan obtained for Rs 90,000 was irregular during the period Dec 2018 to April 2020. During this period, he was gainfully employed in ICICI Bank as Deputy Manager. November 3, 2017: Personal loan availed for Rs. 1,50,000/- shows in CIBIL report as an overdue of Rs 2,770. 'The above personal loans availed by the candidate are sanctioned by the credit institutions based on his repaying capacity. Though he was able to repay, he wilfully defaulted on the loan repayment.' March 24, 2017: The credit Card facility availed by the candidate from HDFC Bank was irregular over a period from Jan 2019 to October 2019 and later settled post write-off during October 2019, making a loss of Rs 40,000. February 10, 2017: Another credit card facility availed by the candidate since 10.02.2017, with a credit limit of Rs 35,000 remained irregular for 37 days during March 2019 to April 2019.
The petitioner (candidate) having participated in the recruitment process as per the notification (job notification), cannot now turn around and state that Clause 1(E) should be read to mean that no dues were outstanding on the date of the notification. More so, when the said clause is not challenged.
One more aspect that needs mention here is that the bank took a prudent decision that the candidates with a history of default in repayment of loans and adverse CIBIL and other external agencies report were ineligible.
The probable rationale behind the said criteria may be that in banking business, the employees deal with public money and therefore financial discipline needs to be strictly maintained. Further there must be efficiency in handling public money and obviously a person with poor/ or no financial discipline cannot be trusted with public money.
Therefore this Court under Article 226 of Constitution of India will not consider the relevancy of the eligibility criteria prescribed by the respondents (SBI).
How does this judgement impact private and government bank job seekers?
When starting a new business, it's common to turn to friends and family for some initial funding. Applying this logic, a younger brother reached out to his older brother, who was working at ICICI Bank at that time, for some money to kickstart his business. To support his brother's business the older brother ended up taking several personal loans and kept doing so even after he left ICICI Bank to take a position as a deputy manager at HDFC Bank This practice of borrowing money to invest in his younger brother's business eventually led him to a point where he had to take out multiple personal loans from various lenders. In the end, it resulted in a never-ending cycle of personal loans and credit card debt.As long as the younger brother's business was thriving, he could keep up with the loan EMIs, but after the younger brother had an accident, things took a turn for the worse. With the business not bringing in enough cash, the older brother struggled to handle the loan repayments with just his salary and thus defaulted on the loan repayments.He did manage to pay off a few loans, but for some personal loan and credit card debts, he fell behind on payments. One lender, from whom he borrowed during his time at ICICI Bank, even filed a recovery suit in court to recover the money after he defaulted on the repayment. In 2019, even HDFC Bank had to write off a loss of Rs 40,000 because he defaulted on his credit card debt payments.Because of all of these incidents, his CIBIL score took a really bad hit, leading to his rejection from the State Bank of India SBI ) Circle Based Officer (CBO) position, even after passing the exam, acing the interview and receiving an appointment letter.After SBI turned him down for the job the older brother filed a Writ Petition in the Madras High Court under Article 226 of Constitution of India, since he had already quit his position at HDFC Bank to take up this job at SBI.He cited a March 20, 2021 letter issued by the CGM-HR of SBI stating that default disputes about loan repayments could be regularised/rectified before joining and so he also should be given the chance to do the same.On June 2, 2025, the Madras High Court rejected his arguments and ruled that SBI is correct in its stance and as per Clause -1(E) of SBI's internal rules, this cancellation of appointment based on adverse CIBIL score is valid.The Madras High Court said: '...The bank took a prudent decision that the candidates with a history of default in repayment of loans and adverse CIBIL…were ineligible. The probable rationale behind the said criteria may be that in banking business, the employees deal with public money and therefore financial discipline needs to be strictly maintained.'Keep reading to know how a CIBIL score became the reason for denial of a bank job with SBI and how this judgment impacts private and public bank job seekers.According to the order of the Madras High Court dated June 2, 2025, here's the timeline of events:However, despite his explanation, the SBI cancelled his appointment on the ground of adverse credit history reflected in the CIBIL report. Aggrieved by the same, he filed a writ petition in the High Court.Also read: Matrimonial Dispute: Husband loses job after wife wins case; Know how this impacts private and government employees SBI's lawyers filed a written response to the person's writ petition. Here's what the bank's lawyers wrote:The Madras High Court said: 'According to the petitioner (candidate) due to the unforeseen situation of his brother meeting an accident, he was unable to manage the loan repayment. The petitioner clearly admitted his default in repaying the personal loans and therefore in my view, the respondent-bank cannot be faulted for invoking Clause 1 (E) of the Notification.'The following observations were made in the CIBIL report :(no facts or figures were changed, everything is as per the High Court judgement)SBI said: 'Though the CIBIL report shows only 9 irregular credit facilities, there were more than 50 credit enquiries against the candidate, during the period 2016 to 2021, ranging between Rs 1000 and Rs 30,00,000. Majority of the credit enquiries being personal loans. Banks considers the abnormal number of credit enquiries against the candidate as severe financial indiscipline. Therefore, there is no significance to the contention raised by Petitioner (candidate).'Madras High Court final judgement: SBI rightfully rejected job to an adverse CIBIL candidateThe Judgement: 'I find no merits in the writ petition and hence, the same is liable to be dismissed. Accordingly, the writ petition is dismissed. No costs. Consequently, the connected Miscellaneous Petition is closed.'The Madras High Court applied the precedent laid down in the judgment of the Supreme Court of India in J.Ranga Swamy v. State of A.P. reported in (1990) 1 SCC 288. The Court said:ET Wealth Online has asked various lawyers about how this judgement may impact prospective bank job seekers, here's what they said:In practice, most of the banks and financial institutions in India check CIBIL scores to check the financial discipline of the candidates. A CIBIL score check is necessary for a role involving financial transactions, as hiring an employee with a bad, flagged financial past record can be risky both financially and reputationally.The judgement upholds that the employer can set the eligibility criteria as per the requirements of the position. In my opinion, if the criteria are not discriminatory or excessive, the same will be upheld by the courts, like what happened in this case. Relying on the CIBIL score of an employee or prospect for a role in the bank can neither be called discriminatory nor excessive, and the candidates should be mindful of the requirements of the job roles they are applying for. If there are errors in the CIBIL report, the employee or prospect can prove his case.For job-seekers, the judgment appears to reiterate the importance of carefully reviewing the eligibility criteria and conditions before participating in the selection process.The judgment also highlights that a record of a personal trait of a candidate, for instance financial indiscipline reflected by a poor credit history, can be lawfully considered by employers for assessing candidates for jobs in banking and financial sector, where such discipline is necessary.These implications could also be relevant for similar jobs with private sector banks where it is customary for employers to also retain a right to conduct background verification checks before confirming a candidate's employment.Aspirants seeking employment in the banking sector should carefully review the details in recruitment notices and maintain a good credit record, as a low CIBIL score may affect their job prospects. If they consider the selection criteria to be unjust, they should pursue appropriate legal recourse challenging such criteria.However, not all banks check CIBIL scores of prospective employees. But it is common practice for banks and financial institutions to check the credit scores of candidates, especially for positions that involve handling financial transactions or managing sensitive data.Since banking involves a high degree of trust and fiduciary responsibility, financial discipline and creditworthiness are seen as indicators of a candidate's ability to manage public money responsibly. A good credit score can reflect positively on an individual's financial management capabilities and trustworthiness whereas a poor or default-ridden credit history may reflect negatively on an applicant's personal financial management and, by extension, raise concerns about their suitability for roles in banking and finance.This Madras High Court's ruling highlights the importance of CIBIL scores and credit reports for banking job applicants, as these factors can affect their eligibility. The Court observed that banks can as part of their selection process review CIBIL scores/reports of job applicants. It clarified that repaying loans before applying does not guarantee employment and that banks can assess the applicant's overall creditworthiness through the CIBIL report.The judgment highlights that if an applicant disagrees with any eligibility condition or clause in the recruitment notification or circular, particularly one related to CIBIL scores, they must specifically challenge it. If the validity of the clause is not contested, no interpretation issues can occur, and the bank's decision based on that clause will generally be upheld.