This is in response to a verdict by HC ordering SBI to sanction education loan irrespective of the low credit score of the parent who is the co borrower
While appreciating the concern of the court regarding the availability of education loans to the needy, i regret to observe that the courts stepping into the basic loan policy of commercial banks and directing to take a particular stand is fraught with great risks. One can understand the intervention if the denial is in contravention of the laid down policy. In the instant case, as per the loan policy of the bank, duly approved by the appropriate authority, credit rating of the borrower or co borrower of the loan needs to be taken into account while considering a loan proposal. Now, as per the court order, parents credit rating is inconsequential as teh repayment of the education loan is to be decided based ' solely on the projected future earnings of the students on employment after education'. This observation will only give strength to the demands of the "education loanees parents' association " which has been demanding waiver of interest, write off of principal etc where the student was not in a position to get suitable employment after studies !
The future income is only a hypothetical one (which is conditional) and the bank cannot be sure of this! With the present verdict, the onus of finding a suitable job for the student falls on the banker ,to ensure repayment of the loan, which is ridiculous. I only hope the bank(s) challenge this order and convince the court to get it reversed. The court should have considered the fact that the loans are given out of the deposits received by the bank's from public and not from goverment funds and the bank's have a responsibility to the depositors while deploying their funds as loans.
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