Madras HC upholds SBI decision to reject education loan for want of sureties

The Madras High Court on Thursday said banks can deny education loan to students by assessing parents' credentials.

Justice S Vaidyanathan, who dismissed the petition by A Deepika, a nursing course aspirant, in his order said, "Rather than running behind the defaulters, a loan can better be rejected at the threshold by identifying a person's credentials. In this case, the bank has rightly done so, as the petitioner's father has defaulted in paying several loans."

According to petitioner, she has completed Higher Secondary Examination in the year 2016-2017 and joined B.Sc Nursing course in Karthikeyan College, Anthananpettai, Nagapattinam. Since the petitioner belongs to a downtrodden community and has no other means to pay the fees, she approached the State Bank of India, Thalaingayiur Branch Nagapattinam District for an educational loan of Rs 3.4 lakh.

Even after submitting all the relevant documents, the respondent bank had refused to grant a loan to the petitioner. The petitioner's request was rejected on many grounds one being that "Nursing course does not come under IBA Educational Loan Scheme" and also that her father is a defaulter.

In its reply, the bank submitted that the admission to the nursing course through the management quota are outside the purview of IBA Educational Loan Scheme and moreover, the petitioner did not fulfil the minimum eligibility mark of 60 per cent. marks to get eligible was admitted under Management quota and not on merits. That apart, it said that the petitioner's father has committed default in repayment of loan availed from various other banks and that several suits are pending against him.

The judge, who dismissed the petition in his order said that fixation of 60 per cent of marks as eligibility for education loan by the bank, cannot be faulted with. "Banks/Financial Institutions are giving a loan to several persons under various political pressures and ultimately public money is being misappropriated and defaulters flee from the country... Whether the loan amount is small or huge, it needs to be recovered from the defaulters. Rather running behind the defaulters, a loan can better be rejected at the threshold by identifying a person's credentials. In this case, the Bank has rightly done so, as the petitioner's father has defaulted in paying several loans," the judge said.

It’s Not A Right For Defaulters: Court

Education loan of over Rs 4 lakh cannot be demanded as a right, said Madras HC. 

Conditions stipulated for sanctioning of such loan would have to be followed. 

A loan can better be rejected at threshold by identifying a person’s credentials, it said.