Madras HC directed bank to disburse education loan to the student

Madras High Court directed a bank to give loan to an engineering college student in a week’s time after the applicant took back the complaint against bank officials.

Disposing an appeal, Justice K Venkatraman noted the evidence of the bank made through its lawyer and ordered it to sanction the education loan.

In his petition, R Premkumar of Kollamcode in Kanniyakumari District, a diploma-holder in mechanical engineering, said he had taken admission in the II-year BE course in the Dr Sivanthi Aditanar College of Engineering, Tiruchendur, during 2007-2008.

He had applied for a loan in the Kollamcode Branch of the State Bank of Travancore, under the Gyan Jyothi Education Loan Scheme. His father had an account in the bank branch for 20 years.

But, the manager had kept delaying the matter without any valid reason. He and his father met the official several times, but the officer did not get a proper reply for the delay.

Therefore he had to borrow Rs 40,000 from a private lender to pay his fees.

He filed a complaint against the manager with the bank Head Office at Thiruvananthapuram.

The head office forwarded the complaint to the Deputy General Manager, Zonal Office, Chennai.

Premkumar brought the matter into the notice of the Banking Ombudsman Manger, Chennai, but there also the matter was treated as closed without an enquiry.

He appealed the court to order the bank for sanctioning the loan for the academic years 2008-09 and 2009-10 so that he can complete his course.

When the matter was put before the Justice K Venkataraman, counsel for the bank, in its defense submitted an application that in view of the petitioner complaints against the bank officials, the amount could not be given.

If the petitioner withdraws his complaints, he said, there won’t be any problem in granting the loan. In turn the petitioner’s counsel agreed to the requirement.

Banks to spare both new and existing education loans from rate hikes

Now students can plan for higher studies as almost all commercial banks including State Bank of India (SBI) and Punjab National Bank (PNB), have not increased interest rates on education loan on the existing as well as new.

Banks have taken this decision on finance ministry advice not to touch the interest rates for priority sector lending, particularly education, agriculture and housing, up to Rs 30 lakh. Most of the private sector lenders do not give education loan and the market is dominated by public sector banks.

The finance ministry senior official told ET, “Almost all the public sector banks have agreed to our suggestion of not raising interest rates for most of the sectors coming under priority sector lending including education loans. This will apply to existing as well as new loans”.

The matter was taken up in finance minister’s meeting with the chief executives of public sector banks earlier this month. All the banks have taken a unanimous decision of not hiking the rates of education loans. “One or two banks were having some objections which is also likely to be shorted out soon,” the official said.

Recently, after RBI hiked the rates in July, banks including SBI, PNB, Allahabad Bank and Bank of Baroda have raised their prime lending rates by 75 to 100 basis points and subsequently revised interest rates on sector-specific loans. But all of them did not touch the education loan. Besides this some of the banks chose not to touch the existing and new auto loans also. In case of new home loans, interest rates for amount up to Rs 30 lakh have been left untouched as it comes under priority sector lending.