Can’t reject edu loan due to kin’s debt: HC

Saravanan.l1@timesgroup.com 22.04.2018

Madurai: The Madurai bench of the Madras high court has warned banks against rejecting educational loans based on the credit report of the applicant’s family, saying such actions would attract contempt of court proceedings.

Allowing the plea of M Hariharasudhan, the court asked Indian Bank to direct all its branches in TN to refrain from rejecting educational loan applications citing reasons outside the scope of the Centre’s scheme. Justice M S Ramesh said the court was constrained to observe that nationalised banks had been rejecting loan applications citing the CIBIL (Credit Information Bureau (India) Limited) reports of the student’s family members. “In my view, such reasoning would amount to wilful disobedience of the orders of this court, for which the concerned bank would be liable for contempt.”

‘Scheme was passed by Centre to help meritorious students’

The judge said the educational loan scheme was introduced by the central government with an objective to help meritorious students pursue his or her education with financial support from the banking system under reasonable terms and conditions. The student was the principal borrower and the loan was to be solely utilised for educational needs.

Hence, any reasonable restrictions imposed by the financial institution had to conform with the scheme’s objective.

“Any factor which is beyond the scope of the scheme as a bar for availing the loan could only be deemed to be prima facie illegal,” said the court while directing the Indian Bank’s branch at New Vilangudi in Madurai to positively consider the student’s plea in two weeks.

The petitioner who joined a five-year law course in a private institution had demanded ₹3.5 lakh as loan including ₹70,000 for the academic year 2017-18. As his application was not considered on time, he knocked on the doors of the judiciary. During the hearing, the bank’s counsel said that it had raised two clarifications with the petitioner – the reason for a year’s delay in admission to the course and the CIBIL report stating that the boy’s father’s score was 570 (which meant that the petitioner’s father might have committed default in repayment of money to either a bank or any trader

(s)). Hence it was unable to proceed any further on the boy’s request.