Banking

Banks advised to assign reasons to reject educational loans

The Indian Parliament on November 22, 2012, informed that all banks have been asked to assign reasons for rejecting educational loan applications. The banks have been advised that the rejection of loans has to be done with the approval of the controlling authority.

Finance Minister P Chidambaram said, “Banks have been advised that rejection of education loan applications has to be with the approval of controlling authority of the branch concerned and the reason for rejection should be communicated to the applicants in writing”. Chidambaram added that the Indian Banks’ Association has advised all banks to give wide publicity to their grievance redressal mechanism on educational loans and to make effective the use of the  mechanism.

The minister also said that any complaints regarding educational loans,  as and when they are received,  are to be taken up for  corrective action with the banks in concern. As of March 2009, the banks had an outstanding loan of Rs. 27,000 crores on education loans, Rs. 35,850 crores as of March 2010 and Rs. 41, 340 crores as of March 2011.

The data was revealed as per the Reserve Bank Of India’s records. The RBI had ordered not to reject any educational loan even if the address of the borrower does not fall under their service area.