Banks reluctant in disbursing education loans
By Neelima Shankar
Dec 30, 2009
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A note circulated for discussion at the recent State Level Bankers' Committee (SLBC) meeting said that the unwillingness of some banks of Thiruvananthapuram in providing education loans is spoiling the inter bank relationship in some centres in the state.

The current norms say that the education loans have to be sanctioned by the bank branch situated nearest to the permanent residence of the applicant. This results in confusion where many branches exist.

The note said that the reluctance on part of banks in giving education loans was making deserving candidates run from one bank to other. The banks that are willing to lend to students are deluged with loan applications and are compelled to entertain applications even from areas near the branches of the ‘reluctant' banks.

This has led to inconvenience among students seeking loans and has harmed the inter bank relationship at the same time.

The Lead Bank Manager of Ernakulam district brought this issue to the attention of the SLBC and urged the SLBC to come out with specific guidelines in this matter so that confusions in sanctioning education loans could be sorted out.

The note also said that the interest rate applicable to these loans differed from bank to bank. Public sector banks usually charged a lower rate of interest than private sector banks. Deserving candidates were often forced to take up high interest rate home loan just because of the fact that they happen to reside closer to bank branches charging high interest rates.

The note suggested that the interest rate on education loans could be rationalised to overcome this problem.

Following certain guidelines issued by the Indian Bankers' Association (IBA) earlier, all banks had reduced the quantum of education loans to nursing students. This had led to for student agitations against some banks. The IBA, subsequently, took up the matter and allowed the banks to go as per the fee structure approved by various State governments. However, most of the banks are yet to issue appropriate guidelines to their branches, the note said.

Earlier this year, a unique education loan scheme for weaker sections was introduced by the centre in Dharmapuri district. The scheme provides a subsidy of Rs. 25,000 for the poor.


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