Date of judgement
9/7/2021
Judges
HONOURABLE MR. JUSTICE P.B.SURESH KUMAR
Subject
All Educational Loan Schemes are designed to ensure that a deserving student is not denied the opportunity to continue higher education simply because he or she lacks the financial means to do so.
Overview
- The petitioner is a second-year BAMS student who was denied an educational loan by the Bank of India, a government-owned bank.
- According to the petitioner, she was admitted in 2019 through the State's centralised allotment process based on her performance in the National Eligibility Cum Entrance Test.
- Because her family could not raise the entire balance fee for the course and they did not have any collateral security to offer for an educational loan to cover the entire balance fee, the petitioner and her father applied to the bank for an educational loan of Rs.7,50,000/- for which the bank did not require any security in accordance with its Educational policy.
- The bank, however, warned her that her request could not be granted since there was insufficient proof to indicate that she would be able to pay the deficit fee later and that her father's business was not currently generating any income.
- The Court stated that the Central government had framed an institutional funding policy in light of the fact that higher education is increasingly privatised and has become a very expensive endeavour, in order to ensure that no deserving student was denied the opportunity to pursue higher education due to a lack of financial support.
- In a similar vein, the RBI released a circular based on the Indian Banks' Association's Model Educational Loan Scheme to help banks develop adequate educational loan schemes.
Issues
- Is the bank liable to deny the educational loan citing the liability of the student’s parents?
Analysis of Judgement
- If the ability of the applicant's parents to repay the loan cannot be a consideration for granting an educational loan, then, according to me, the parents' liability, if any, shall not be an impediment for the bank in considering an application for an educational loan.
- While granting the petition, Justice P.B Suresh Kumar stated that the object of all Educational Loan Schemes formulated by Banks pursuant to the direction issued by the Reserve Bank of India in terms of the said Circular is to ensure that a meritorious student shall not be deprived of the opportunity to pursue higher education merely because he or she does not have the resources for the same.
- The revised guidance notes on the Model Education Loan Scheme for Pursuing Higher Education, released in 2015, also clarified that it was a socially and economically relevant scheme aimed at providing need-based finance to meritorious students for pursuing higher education and that repayment options for educational loans under the scheme are not to be assessed based on the financial situation of the borrower.
- As a result, the Court ruled: 'I am of the opinion that the bank's stance that the petitioner's family may not be able to pay the shortfall fee due to the petitioner for the course, and hence the petitioner is not entitled to the loan sought for, is unsustainable in law.'
Conclusion
If the ability of the applicant's parents to repay the loan cannot be a factor in obtaining an educational loan, I believe that the parents' obligation, if any, should not be an impediment for the bank in considering an educational loan application. As a result, the bank's argument that the petitioner's application cannot be considered one preferred bonafide because her father did not disclose his liabilities in the application cannot be accepted, especially since the bank does not dispute the petitioner's eligibility for the educational loan she applied for.
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