The High Court of Kerala recently ordered the Bank of India to disburse the loan requested by the applicant on the grounds that she was a deserving student and that the possibilities of repayment of the student loans should not be assessed on the basis the financial situation of the parents.

“While the ability of the applicant’s parents to repay the loan cannot be a consideration for granting an educational loan, in my opinion, the responsibility, if any, of the parents should not also be an obstacle for the bank in examining an application for the education loan “, the High Court observed in the judgment.

Judge PB Suresh Kumar while welcoming the petition observed that “the purpose of all education loan programs formulated by banks in accordance with the guidelines issued by the Reserve Bank of India under said circular is to ensure that a deserving student is not deprived of the opportunity to pursue higher education on the sole ground that he / she does not have the resources for the same.‘

The petitioner is a second year BAMS student whose application for a study loan was refused by the Bank of India, a public sector bank. According to the petitioner, she was granted admission through the state’s centralized allocation process in 2019 on the basis of her rank in the National Cumulation Eligibility Admission Test, 2019.

Since her family could not collect the full balance fees for the course and she had no collateral to offer to receive an educational loan for the full balance fee, the petitioner and her father asked the bank for an educational loan. of Rs.7.50,000 / – for which no collateral is required by the bank in terms of its educational loan program.

However, she was informed by the bank that her claim could not be considered as there was no satisfactory evidence to show that she will later be able to pay the deficit charges and that her father was not currently drawing no income from his business.

The Court observed that the central government had developed an institutional financing policy considering that higher education is gradually being privatized and has become a very expensive affair, to ensure that no deserving student is denied the opportunity to pursue higher education for lack of financial support. The RBI had also issued a circular on the model education loan program prepared by the Association of Indian Banks to formulate appropriate education loan programs.

‘The object of all education loan programs formulated by banks in accordance with the guidelines issued by the Reserve Bank of India under said circular is to ensure that a deserving student is not deprived of the opportunity to pursue higher education for the sole reason that he / she does not have the resources for the same. ‘

The revised Guidance Notes on the Student Loan Program Model for Pursuit of Graduate Studies published in 2015 also clarified that it is a socially and economically relevant program aimed at providing funding based on the needs of deserving students to pursue higher education and that the repayment possibilities of student loans under this scheme should not be assessed on the basis of the parents’ financial situation, but on the basis of projected future income students working after graduation.

In view of the above arguments, the Single Bench noted that if the assertions raised by the bank were accepted, it would defeat the object and purpose of the program. Accordingly, the Court held the following:

‘I am of the opinion that the bank’s position that the petitioner’s family may not be able to afford the deficit fees payable by the petitioner for the course and therefore the petitioner did not not entitled to the loan requested, is unsustainable in law. ‘

Case title: Devika Soniraj v. Zone Manager, Bank of India

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