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THE purpose of educational loans introduced by the government in 2001 was to ensure that meritorious students did not discontinue studies for want of funds. Subsequently, on the basis of complaints from students and parents on the difficulties faced by them in securing the loans, the Reserve Bank even revised the scheme to ensure more affordable terms and conditions. Yet, there are any number of complaints of eligible students being denied loans, of inordinate delays in grant of loans, of banks demanding collateral security even for amounts that do not require any, and of cases of corruption and harassment of applicants. As per the scheme, no collateral is required to be provided for loans up to Rs 4 lakh. For loans above Rs 4 lakh and up to a limit of Rs 7.5 lakh, only a third party guarantee is sufficient, and even this could be waived at the discretion of the bank.Onlyfor loans above that limit, a collateral security is needed. In order to ensure quick disbursal of such loans, even a timeframe of 15 days to a month is fixed. In addition, banks are given the discretion to be flexible in respect of the norms fixed for the loans, so that eligible students are not unduly denied the facility. Yet, there are several cases where banks have refused to give the loans on one pretext or the other. I do not know how many students are aware of this, but in cases such as these, they can complain to the Nodal Officer of the bank, and in case he does not resolve the issue, complaints can be lodged with the Banking Ombudsman (www.bankingombudsman.rbi.org.in). Given below are three cases decided by the Ombudsman and reported in the annual report of the banking Ombudsman scheme 2009-2010, released by the Reserve Bank in February 2011. The cases also show the behaviour of the banks in respect of a scheme listed under the priority sector lending by the government.
In the first case, the student had taken an education loan for Rs2.98 lakh in February 2007.Now, in violation of the RBI directive on the scheme, the bank had taken as collateral security, LIC policies and a fixed deposit of Rs 75,000.That was not all. The bank even violated its own terms and conditions of sanction and started recovering the EMIs from September 2007, instead of March 2009. Worse, it encashed post-dated cheques without the customer’s consent and even imposed cheque bounce charges. The banking Ombudsman directed the bank to return the collateral securities, reverse the cheque bounce charges and reschedule the EMIs. In the second case, on
receipt of an application for an education loan from a student for
pursuing an MBA course, the bank promised to release the money without
any delay, but returned the papers after three months, refusing the
loan. What was the reason for the refusal? That the loan disbursement
officer was ill. Since the student had paid Rs 5000 to the college
towards registration, the Ombudsman asked the bank to pay that amount
as token compensation and another Rs 5000 as a In the third case, a parent approached the bank for an educational loan for his daughter for pursuing a one-year, postgraduate-level full-time programme called Advanced Certificate Course in Clinical Trial Management, run by a state-owned university. The bank promptly rejected the loan application on the ground that certificate courses were not covered under their student loan scheme. The Ombudsman, before which the parent filed a complaint, agreed and rejected the complaint. The parent filed an appeal before the Appellate Authority provided under the Ombudsman scheme. The Appellate Authority observed that the revised model educational loan scheme framed by the Indian Banks Association provided only an indicative list of all eligible courses for granting educational loans. It also further advised that each bank was free to extend the loan to any course not covered in the RBI/IBA list, with the avowed target that no eligible student should be deprived of higher education for want of finances. In this particular case,
the Appellate Authority observed that the student wanted to pursue a
full-time 12-month advanced certificate programme run by a prestigious
university with assured placements. It was, therefore, incorrect to
treat this as a routine certificate course of short duration. Going by
the spirit of the education loan policy, even routine certificate
courses were eligible for educational loans, if the applications were
in order. The bank was directed to grant the loan.
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