Bad CIBIL score can cost you job: How Madras HC ruling on SBI case may impact bank job seekers

A former deputy manager at HDFC Bank lost his appointment as a Circle Based Officer (CBO) at State Bank of India (SBI) due to poor credit history, despite clearing all recruitment stages, including the examination and interview.

A recent Madras High Court order upheld the SBI’s decision to cancel the appointment of the CBO candidate due to his adverse CIBIL credit report.

According to the court order, the petitioner, who had earlier worked at ICICI Bank and HDFC Bank, had taken multiple personal loans to fund his younger brother’s business. The business later ran into trouble after the brother met with an accident, leading to loan defaults and severe debt accumulation.

His credit history included defaults, overdue payments, write-offs, and more than 50 credit enquiries between 2016 and 2021, reported The Economic Times.

Despite passing the SBI CBO examination and interview and receiving an appointment letter in March 2021, the candidate’s offer was cancelled after his adverse CIBIL report came to light.

Citing Clause 1(E) of its recruitment notification, SBI cancelled his appointment, stating that candidates with records of default in repayment of loans or adverse reports from CIBIL and other agencies are ineligible for employment.

He filed a writ petition challenging this in the Madras High Court.

The court dismissed the writ petition and upheld the cancellation order passed by the Human Resources department of SBI.

“...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,” the court said.

The judgment clarified that even if a candidate repays outstanding dues before joining, banks can still assess their overall creditworthiness through CIBIL reports and are not obligated to appoint candidates with poor credit records.

Legal experts say this ruling will have wide implications.

“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,” ET quoted Suma R V, Partner at Kochhar & Co., as saying.

“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.”

Jatinder Singh Saluja, Partner at AZB & Partners, pointed out that the judgment reaffirms that employers can lawfully consider financial discipline as an eligibility criterion, especially for banking jobs where handling funds requires high levels of trustworthiness, ET reported.

“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,” Saluja said.