The purpose of education loan introduced by the government in 2001 was to ensure that meritorious students did not discontinue studies for want of funds. Subsequently on the basis of complaints from students and parents on the difficulties faced by them in securing loans, the Reserve Bank of India (RBI) revised the scheme to ensure “more affordable terms and conditions”. Yet, there are innumerable complaints of eligible students being denied the loan, of inordinate delays in grant of loans, of banks demanding collateral security even for amounts that do not require any and cases of corruption and harassment of applicants. I do not know how many students are aware of this, but in such cases as these, they can complain to the nodal officer of the bank and if he does not resolve the issue, complain to the banking ombudsman (www.bankingombudsman.rbi.org.in). I give below three cases decided by the ombudsman .

In the first case, in violation of the guidelines framed by the RBI and the Indian Banks Association which clearly state that no collateral security is required for loans up to Rs 7.5 lakh, the bank had taken as security, LIC policies and a fixed deposit of Rs 75,000 from a student who had taken a loan of Rs 2.98 lakh. Also, in violation of its own terms and conditions of sanction, it started recovering the EMIs two years ahead of schedule and without any notice to the customer and even slapped cheque bounce charges. The banking ombudsman directed the bank to return the securities, reverse the cheque bounce charges and reschedule the EMIs.

In another case, where the bank returned the application papers after three months (as per guidelines, it is to be disposed of in 15 days to a month) saying that the loan disbursement officer was ill, the ombudsman directed it to pay Rs 10,000 towards compensation and also reconsider the loan, which was duly sanctioned.

In the third case, where the bank had rejected an application on the grounds that “certificate courses” were not covered under the education scheme — this had been upheld by the ombudsman too — the appellate authority under the scheme intervened. The authority pointed out that the guidelines on the educational loan scheme provided only an indicative list of all eligible courses. The bank was free to extend the loan to any course not covered in the list, with the avowed objective that no eligible student should be deprived of higher education for want of finance. The bank was directed to grant the loan.