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2021 Supreme(Online)(KER) 47031
HIGH COURT OF KERALA
N. NAGARESH, J
ALIKUNJ P.M. ALIAS SHOUKATH ALI, – Appellant
Versus
THE BRANCH MANAGER, SOUTH INDIAN BANK LTD., – Respondent
WP(C)/17538/2021
SRI.P.T.MOHANKUMAR, SRI.GEORGE CHERIAN, SRI.RAJESH CHERIAN KARIPPAPARAMBIL, SMT.FARHA MATHER, SRI.SUNIL SHANKER, SRI.K.K.JOHN, SC
Banks have discretion to define eligibility criteria for educational loans, provided they comply with statutory directives from the Reserve Bank of India.
Headnote:
Loan - Educational Loans - Reserve Bank of India Circular - Loan Eligibility Provisions - The Court analyzed the validity and compliance of local bank policies against statutory guidelines set forth by the Reserve Bank of India regarding educational loans, ultimately upholding the bank's discretion to set its own eligibility criteria.
Fact of the Case:
Petitioners sought a command for reconsideration of their educational loan application, which was denied by the bank based on the petitioner's academic performance not meeting the bank's cut-off criteria, despite meeting the Reserve Bank of India's minimum eligibility requirements.
Finding of the Court:
The court found that the bank did not violate any statutory instructions from the Reserve Bank of India and held that the bank is within its rights to set specific eligibility criteria for educational loans.
Issues: Whether the bank's denial of the educational loan based on its prescribed cut-off marks was justified in light of the eligibility criteria set by the Reserve Bank of India.
Ratio Decidendi: The court held that banks have latitude to establish their own criteria for loan eligibility, provided they do not contravene statutory provisions set by the Reserve Bank of India.
Final Decision: Writ petition dismissed.
J U D G M E N T
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Dated this the 29th day of October, 2021 Petitioners are before this Court seeking to command the 1st respondent to reconsider Ext.P5 loan application of the petitioners in the light of Ext.P7 Model Educational Loan Scheme formed by the Indian Banks Association and approved by the 2nd respondent. The petitioners further seek to direct the 2nd respondent to issue appropriate orders or directions to the 1st respondent ensuring strict compliance of the provisions of the above Scheme in its letter and spirit.
2. The 1st petitioner is father of the 2nd petitioner. The
1st petitioner is serving under a private employer as Marketing Head. The 2nd petitioner successfully completed her Higher Secondary Course under CBSE stream with 68% marks. The 2nd petitioner applied for admission to a Degree Course in Audiology and Speech Language Technology (BASLP) at Yenepoya Faculty of Allied and Healthcare Professionals, Mangalore.
3. The petitioners submit that the said College in Mangalore has a Certificate of Accreditation issued by the National Assessment of Accreditation Council. The Institution is approved by the Rehabilitation Council of India also. The admission obtained by the 2nd petitioner in the said Institution is purely on merit, based on the marks obtained in Plus Two examination.
4. The 1st petitioner submitted an application to the 1st respondent-Branch Manager for educational loan of ₹15 lakhs. The application was submitted on 11.11.2020 as per Ext.P5. The 1st petitioner had already availed another loan from the same Bank for the purpose of the education of his elder son. The said loan was availed depositing title deeds as security to the loan.
5. The 1st petitioner would contend that he has not defaulted in repayment of the said loan. The 1st petitioner is having a sufficiently high credit score. He therefore bona fide believed that the loan will be sanctioned. The 1st respondent, however, decided not to sanction the loan applied for by the 1st petitioner. In Ext.P6, it was stated that the 2nd petitioner has not secured the minimum cut off marks fixed by the Bank at 80% in each subjects. Aggrieved by the decision of the 1st respondent as reflected in Ext.P6, the petitioner has approached this Court.
6. The learned counsel for the petitioners would submit that the Reserve Bank of India, after considering the recommendations of the Indian Banks Association, has issued Ext.P7 Circular in the year 2001. In Ext.P7, it has been specifically directed that the Scheme attached to Ext.P7 be adopted by all Commercial Banks.
7. The learned counsel for the petitioners pointed out that as per Clause 4.2 of the Model Educational Loan Scheme, under the head 'Student eligibility', it has been precisely stated that the student should have scored minimum 60% in the qualifying examination for admission to graduation courses. The 2nd petitioner, in fact, has obtained 68% marks and therefore she will definitely satisfy the eligibility criteria as laid down by the Reserve Bank of India in Ext.P7.
8. However, the 1st respondent sought to deny the educational loan applied for by the petitioner based on Annexures-R1(a) and R1(b). In Annexure-R1(b), which is the revised Guidance Notes on Model Educational Loan Scheme for Pursuing Higher Education in India and Abroad, 2015, it has been stated that for rating purpose, the Banks could use rating of educational institutions and student as a tool for targeting students borrowers and improving asset quality. The academic record and ranking in the selection test would be core for the initial rating.
9. The learned counsel for the petitioners urged that Annexures-R1(a) and R1(b) issued by the Indian Banks Association do not have a statutory flavour, whereas Ext.P7 Circular issued by the Reserve Bank of India has the support of law. The respondent-Bank cannot be permitted to depart from a statutory stipulation made by the Reserve Bank of India and frame their own private rules which go
