Banks should not reject education loans arbitrarily: HC

Updated on: Friday, December 03, 2010

Coming to the aid of two students who were denied education loan by a nationalised bank, Madras HC observed banks should not reject applications of poor students arbitrarily and instead consider their cases sympathetically to promote the cause of education.

"Bank managers should not develop retrograde attitude and deny education loan arbitrarily. They have to promote cause of education, which will empower youth of our nation," Justice R Sudhakar said in his order on the petitions by the students.

"The Chairmen of all nationalised banks and other banks should suitably instruct branch managers, especially in rural areas,to ensure the applications of eligible and poor students should be considered sympathetically and in a customer friendly manner to promote cause of education," he said.

The petitioners -- G.Divya and G Preethi -- submitted that a Branch Manager of Canara Bank in Vellore District whom they approached for educational loan for pursuing their engineering degree course insisted that their father, co-applicant, get a no-objection certificate from another bank in which he had availed a poultry loan of Rs 3.57 lakh.

Directing the Canara Bank to issue the loan application immediately and process it on the students complying with other formalities, Justice R.Sudhakar said there was no clause in the Model Educational Loan Scheme that barred wards from availing educational loan if the co-applicant had taken a loan for other than educational purpose.

The Judge said the scheme only indicated the bank may obtain a no-due declaration. The purport of this clause was to ensure that no student availed more than one educational loan from different banks.

This should not be confused with the loan availed for business purpose by co-applicant. Education and commercial loans were independent of each other, the Judge held.

Pointing out that no security was required for educational loans up to Rs four lakhs, the Judge said the insistence on a no-objection certificate for grant of education loan "is totally unnecessary and unwarranted. It is a misreading of the scheme."

Banks should not reject education loans arbitrarily: HC

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