officials should be "punished with imprisonment" if they reject
education loan, says a member of parliament belonging to the DMK.
"Bank officials should be punished with imprisonment if they
reject education loan or charge higher rate of interest than what
is prescribed. In many cases, rural students are denied even an
application for education loan," R. Thamaraiselvan, the DMK MP
from Dharmapuri, told IANS Sunday.
He said that some malpractices adopted by officials of
nationalised banks include demanding applicants to deposit money
in a specified account or asking them to purchase a life insurance
policy from a specific agent to get the education loan sanctioned.
Thamaraiselvan Saturday took up with Indian Overseas Bank's senior
officials the case of V.M. Nithya, a rank holder of Periyar
University, whose application for an education loan of Rs.20,000
was rejected by the bank.
Nithya's father V. Muniraj was forced to file a complaint with the
Reserve Bank of India (RBI) after the bank did not reply to the
applicant for nearly six months.
The IOB's Indur branch in the Salem region rejected Nithya's loan
application, after the complaint was made to the central bank, on
the ground that she had not scored the qualifying marks.
"Nationalised banks have given thousands of crore of rupees to
sick companies like Kingfisher Airlines. But when it comes to
education loan to poor, various other considerations, including
caste, comes into picture," Thamaraiselvan said.
"Private banks do not even entertain education loan applications
from rural students," he added.
He said banks deny education loan citing service area concept,
although the RBI has categorically said the concept is only for
Thamaraiselvan has moved a private member's bill titled 'The
Education Loan Bill 2012', wherein he has proposed that the
director of a bank or some other official be punished with a jail
term of not more than one year or a fine equivalent to the loan
amount if the education loan is refused.
It also proposes jail term for officials if the bank insists on a
guarantee or charges higher interest rate than what is prescribed
by the government or withholds degree/diploma or initiates
recovery proceedings before completion of one year of securing a
job by the borrower.
Thamaraiselvan said the bill would be taken up for discussion
during the budget session of parliament.
According to him, the government should formulate a waiver scheme
for education loan if a borrower does not get a job five years
after completing the education.
"Till date, education loans to the tune of around Rs.52,000 crore
have been sanctioned to around 20 lakh students. Banks by not
following the norms force the students to default and classify the
loan as non-performing," said K. Srinivasan, convenor of Education
Loan Task Force (ELTF).
The ELTF is a team of volunteers taking up the cases of education
loan rejections with the banks free of charge.
Srinivasan added that according to the Indian Banks' Association
norms, the repayment period for a education loan is 10 years but
most of the banks restrict it to three-five years, resulting in
According to Srinivasan, the banks are likely to put the student's
future credit eligibility at risk with their ad hoc measures
relating to education loan.
"When the banks refer the education loan accounts to CIBIL (Credit
Information Bureau (India) Ltd.) the education loan defaulting
students may not get even credit card or other loans from the
banking sector," Srinivasan said.
He added that nationalised banks are losing an opportunity of
building their brand value among young students as they are likely
to become top executives or businessmen.
"Till date, we have sorted out the problems for around 1,000
students. ELTF is basically an online platform and it has nothing
to do with banks or the government," Srinivasan said.