BANKS CANNOT DENY EDUCATIONAL LOANS CITING LIABILITIES OF THIER PARENTS - KERALA HC

The Kerala HC ruled that banks cannot deny educational loans citing liabilities of their parents. The Court ordered the Bank of India to disburse the loan applied by the petitioner on the ground of being a meritorious student.

The Court observed that "the object of all Educational Loan Schemes formulated by Banks according to the direction issued by the Reserve Bank of India in terms of the said Circular is to ensure that a meritorious student shall not be denied of an opportunity to continue higher education merely on the ground that he/she does not have resources for the same".

FACTS 

The Petitioner is a 2nd yr BAMS student; she secured the position based on her rank in the National Eligibility Cum Entrance Test, 2019. Since her family could not afford to pay the entire fee for the course, the petitioner applied for an educational loan in the bank for Rs.7,50,000/- for which the bank requires no security in terms of its Educational Loan Scheme. 

However, the loan was denied to the petitioner, citing the economic background of her parents. The bank informed that there is no satisfactory evidence to show that the petitioner l would be able to pay the loan, as the petitioner's father is not earning enough due to the 
pandemic.

HELD
If the contentions raised by the bank are accepted, it would defeat the object of the Educational Loan Scheme formulated by the bank. The stand of the bank that the family of the petitioner may not be in a position to repay the loan and therefore the petitioner is not entitled to the loan is unsustainable in law. 
 

Author: Papiha Ghoshal