PSU banks cannot deny education loan to students

The students who are keen to fulfill their dreams of taking up higher education but are facing difficulty in getting education loan can directly dial finance minister P Chidambaram number or ministry officials. The government has allowed the students to directly contact the finance minister or finance ministry officials in case a public sector bank denies an education loan without giving a proper reason.

Ministry has instructed the public sector banks to make sure that criteria like location of residence or age should not be the reason for not giving the education loan to the students. ‘We have directed the banks not to create objections in issuing loans as long as the area of residence of the student and the bank branch are in the same district,’ a senior official in the finance ministry said.

In other words, an education loan application cannot be rejected by any PSU bank branch just on the basis that the residence of the student, the education institution or the guarantor is not located in the same place.

It has come into notices that at times the residence of an education loan applicant is different from that of the guarantor. “Banks usually insist that both the guarantor and the candidate should be residing under the area of the branch, which is impractical. We have issued a directive to all the banks with an aim to remove this ambiguity,” the official said.

The official said that finance minister has received letters in this regard from many students who have requested for his intervention. The official said all the genuine cases have been resolved. A senior officer of joint secretary rank has been appointed to look into all education loan-related grievances which are addressed to the finance minister or the ministry. Moreover PSU banks have also been instructed that the age of the applicant should not be criteria for rejecting education loans. According to this even a 35 or 45-year-old can apply for an education loan.

According to the directives given to banks now can no longer insist that the place of residence of the student and the college concerned should be located at the same place i.e. ‘branch area’ for availing a loan. Usually the branch area of a bank is within a radius of six to eight kilometers, although there are no set rules for it. The area can also vary from bank to bank and depending on the location. In comparison, a district area covers 30-40 kms. For the rejection of an application the genuine reason can include past record of the candidate. The pro-student rules are not applicable for courses which are not recognized by any statutory body like UGC, AICTE, the central government or a state government.

IOB hiked lending rates by 14% spared housing, education advances

Public sector Indian Overseas Bank (IOB) on Tuesday raised benchmark lending rate by 0.50 per cent i.e. to 14 per cent. The rates will come into effect from August 16. Bank has not touched housing loans up to Rs 30 lakh and education advances from the increase.

IOB said in a filing to the Bombay Stock Exchange that the existing housing loans and education loans, which are linked to BPLR, have been exempted from the present revision.

The bank sources said the fresh housing loans up to Rs 30 lakhs and fresh education loans have also been spared from the hike.

IOB sources added that existing loans under special credit scheme, where fixed rate option is applicable have also been exempted from the present revision.

SBI’s study loans cheaper

State Bank of India, the country’s largest public sector bank, has reduced interest rates on educational loans.

New rates for loan amounts less than Rs4 lakh have been reduced from 12.25% to 11.75%. Rates for loan amounts above Rs7.50 lakh have been reduced from 13.25% to 12.25%. Interest rates for amounts between Rs4 lakh and Rs7.50 lakh have remained unchanged at 13.25%.

Other banks may follow suit. Says M.P. Murugan, assistant general manager, Allahabad Bank: “We are the leader in the educational loan space. We already have special lower interest rates for IIT and IIM students, at 11.25%. However, if the need arises, we may look into reducing our rates as well.
N.R. Shet, general manager, Corporation Bank, says: “We do not have immediate plans to reduce educational loan rates, but you cannot rule out the possibility of us doing so. Our rates are not that high, so we will wait and watch.”

Any cut is, of course, good news for students. Hsoc Matthai, 17, a student from Mumbai, says: “Educational loans are necessary. My brother and I are planning to go for professional courses this year. Even a small decrease in interest rates makes a lot of difference. We would rather go to a bank that offers lower rates.”