Almost twenty years after the National Democratic Alliance government introduced an education loan program for students from poor families, Indian public banks continue to deny loans to students whose parents have poor families. credit rating. The Association of Indian Banks, a representative body of all banks with offices in the country, had prepared this proposal as a model education loan program in 2000. The following year, the NDA government announced the program in the Union budget, promising concessions to students wishing to pursue higher education, and the Reserve Bank of India notified in April of that year. But the experience of students and the continuing need for judicial intervention indicate that the implementation of the device is not guided by the benefit of aspiring students, but by the prudence of the banks.

The RBI circular stated that the loan program “aims to provide financial support from the banking system to deserving / deserving students to pursue higher education in India and abroad.” To be eligible for the program, students must have passed 60 percent of qualifying examinations for graduation courses; for applicants from Scheduled Castes or Scheduled Tribes, the requirement was 50 percent. The program allowed all commercial banks to grant loans “subject to the repayment capacity of parents / students”, with a ceiling of Rs 7.50 lakh for courses in India and Rs 15 lakh for courses. abroad. In addition, he offered a moratorium on loan repayment for the duration of the course and one year after, or six months after finding a job, whichever comes first.

“The main emphasis is on ensuring that every deserving student despite being poor has the opportunity to continue their studies with the financial support of the banking system on affordable terms,” the RBI circular said. “No deserving student is denied the opportunity to pursue higher education for lack of financial support.” However, students from economically disadvantaged backgrounds who apply for a study loan are often rejected by public sector banks, citing their parents’ low CIBIL score. A CIBIL score refers to a three-digit number issued by the Mumbai-based credit information company TransUnion CIBIL, formerly known as Credit Information Bureau India Limited.

Banks refer to this score when assessing the creditworthiness of a potential borrower. However, the RBI circular states that students, and not their parents, are considered the primary borrowers. In fact, in August 2015, the Association of Indian Banks released “Revised Guidance Notes” on the Education Loans Program. “The student borrower has no credit history and as such is assumed to be creditworthy because this is a futuristic loan,” the guidance notes say. It even deals with the circumstances in which the parents of a candidate-student have bad credit. “It is likely that the co-borrower for the loan has a past credit history and anything adverse could affect the credit risk assessment … To overcome this, the bank may, as a precautionary measure, insist on an acceptable co-borrower. for the bank, in the event of an unfavorable credit history of the parent / guardian of the student.

But none of them seem to be implemented in practice. Vani Rajeev, a student pursuing her Bachelor of Science in Radiology, was one of those students whose application for a study loan was turned down by the State Bank of India, citing her single mother’s poor credit history. “We applied for the loan in February,” Vani’s mother Anju Jayan told me over the phone. “My daughter does not have her father. She only has me. I had a CIBIL file since I had already applied for a housing loan. The loan was refused because of my CIBIL file. In February 2020, Jayan applied for a loan of Rs 4 lakh for his daughter’s education, but SBI’s Kulasekharamangalam branch in Kottayam rejected the request soon after.