No bank can deny educational loan if the SC/ST and MBC categories student have obtained minimum 35 per cent marks.
S Maran, belonging to SC community, had filed a writ petition before Madras High Court as the branch manager of the State Bank of Travancore in Mogappair had refused the educational loan on the ground that he had not obtained the minimum mark of 45 per cent.
In the ruling given in the favor of writ petitioner S Maran, Justice D Hariparanthaman said if the court accepts the bank argument then in Tamil Nadu, except the general category student, students belonging to SC/ST and MBC categories will not get admission in BE courses who have not obtained minimum 45 per cent marks. However, the government has prescribed only 35 per cent for admission to SC/ST students. Such prescription of lower marks for SC/ST students was done in order to achieve the objective of the constitutional goal set out in Article 46 of the Constitution. As per bank argument the very purpose of the educational loan will get defeated.
The judge said if such an (rejection) attitude was adopted for Dr BR Ambedkar, then he could have also not been able to go for higher education as he had obtained only 287 marks out of 750 in the matric exam. The judge pointed out, but the King of Baroda showed his kindness and extended financial assistance to him.
The Central government has also introduced a scheme to provide financial assistance to the weaker sections of society for their education. The judge said, it is very unfortunate that the respondent bank was denying the same citing giving one reason to another. Hence, the judge directed the bank to give the loan to the petitioner within four weeks. The judge also directed the bank to sanction the loan for the subsequent years also.
Monday, September 20, 2010
Tuesday, September 7, 2010
Finance ministry declines from immediate need for credit guarantee fund to back education loan
The ministry of finance has declined for any immediate need for credit guarantee funds to back education loan as proposed by the Indian Banks’ Association (IBA). The public sector banks have been demanding for credit guarantee fund from government as the number of defaults in education loan is increasing.
An official of the banking division of the finance ministry said, "We are not convinced that a fund needs to be created at this point. The aggregate figures that we have do not give us any cause for concern.” According to ministry the gross defaults are below 3 per cent which is ‘manageable’, therefore banks’ fears are misplaced.
During the meeting with finance minister the banks had not brought adequate data with them so the ministry has asked them to submit detailed data with to assess the actual position on default. The official said, "The banks had not come at the meeting with the finance minister with adequate data to justify their demand. We want more details before we move forward on the matter."
On August 14, the PSU chief executives had met finance minister, Pranab Mukherjee, in which IBA had put forward a suggestion for the creation of a fund to support banks on their education loan portfolio as there is increase in the repayment defaults.
After the meeting K Ramakrishnan, chief executive officer, IBA, told FC that the discussions on a credit guarantee fund for education loans was at initial stage. He said, “The proposal is in an initial stage.” However IBA did not give suggestion regarding the size of the fund.
The banks have been asked to submit a break-up of the defaults under various categories, including loans up to Rs 4 lakhs, above Rs 4 lakh and up to Rs 7.5 lakhs and those above Rs 7.5 lakhs by the finance ministry.
Currently banks are giving education loan of up to Rs 4 lakhs without any security or co-obligation of parents, for loan above Rs 4 lakhs to Rs 7.5 lakhs banks ask for co-obligation of parents along with collateral security in the form of suitable third party guarantee. Further for loans above Rs 7.5 lakhs banks ask for co-obligation of parents along with tangible collateral security for suitable value along with the assignment of future income of the student for payment of installments.
The student has to repay the loan within co-obligation of parents along with tangible collateral security for suitable value along with the assignment of future income of the student for payment of installments.
According to bankers in the coming days there is a possibility that education loan given with out security can become as a major source of defaults. In the meeting with FM bankers informed that education loan is mainly being taken by those students who are joining institutes where ratio of getting a job is very low which can lead to increase in the defaults. an official of Punjab National Bank pointed out, “Education has now become a big business. All sorts of institutes have come up and banks cannot deny loans to students and there are fears that students might not get job or not a commensurate job to pay back loan. If denied, applicants put pressure on banks from government and elsewhere.”
As per the data available with the finance ministry, at the end of March 31, 2010 the total outstanding of education loans of the 27 public sector banks amounted to Rs 34,192 crore in 18,51,106 accounts. In this SBI lead the pack which reported the total loans of Rs 8,907 crore, while Indian Bank total loans stood at Rs 2,308 crore, PNB reported Rs Rs 2,272 crore, Bank of India at Rs 1,719 crore and Andhra Bank at Rs 1,647 crore among the top five in terms of outstanding loans.
An official of the banking division of the finance ministry said, "We are not convinced that a fund needs to be created at this point. The aggregate figures that we have do not give us any cause for concern.” According to ministry the gross defaults are below 3 per cent which is ‘manageable’, therefore banks’ fears are misplaced.
During the meeting with finance minister the banks had not brought adequate data with them so the ministry has asked them to submit detailed data with to assess the actual position on default. The official said, "The banks had not come at the meeting with the finance minister with adequate data to justify their demand. We want more details before we move forward on the matter."
On August 14, the PSU chief executives had met finance minister, Pranab Mukherjee, in which IBA had put forward a suggestion for the creation of a fund to support banks on their education loan portfolio as there is increase in the repayment defaults.
After the meeting K Ramakrishnan, chief executive officer, IBA, told FC that the discussions on a credit guarantee fund for education loans was at initial stage. He said, “The proposal is in an initial stage.” However IBA did not give suggestion regarding the size of the fund.
The banks have been asked to submit a break-up of the defaults under various categories, including loans up to Rs 4 lakhs, above Rs 4 lakh and up to Rs 7.5 lakhs and those above Rs 7.5 lakhs by the finance ministry.
Currently banks are giving education loan of up to Rs 4 lakhs without any security or co-obligation of parents, for loan above Rs 4 lakhs to Rs 7.5 lakhs banks ask for co-obligation of parents along with collateral security in the form of suitable third party guarantee. Further for loans above Rs 7.5 lakhs banks ask for co-obligation of parents along with tangible collateral security for suitable value along with the assignment of future income of the student for payment of installments.
The student has to repay the loan within co-obligation of parents along with tangible collateral security for suitable value along with the assignment of future income of the student for payment of installments.
According to bankers in the coming days there is a possibility that education loan given with out security can become as a major source of defaults. In the meeting with FM bankers informed that education loan is mainly being taken by those students who are joining institutes where ratio of getting a job is very low which can lead to increase in the defaults. an official of Punjab National Bank pointed out, “Education has now become a big business. All sorts of institutes have come up and banks cannot deny loans to students and there are fears that students might not get job or not a commensurate job to pay back loan. If denied, applicants put pressure on banks from government and elsewhere.”
As per the data available with the finance ministry, at the end of March 31, 2010 the total outstanding of education loans of the 27 public sector banks amounted to Rs 34,192 crore in 18,51,106 accounts. In this SBI lead the pack which reported the total loans of Rs 8,907 crore, while Indian Bank total loans stood at Rs 2,308 crore, PNB reported Rs Rs 2,272 crore, Bank of India at Rs 1,719 crore and Andhra Bank at Rs 1,647 crore among the top five in terms of outstanding loans.
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