RBI asks banks not to reject any education loan

The Reserve Bank today asked banks not to reject any educational loan application even if the residence of the borrower fell out of their area of service.

The bank said in a notification yesterday that, "... banks are advised not to reject any educational loan application for reasons that the residence of the borrower does not fall under the bank's service area."

Banks have been also asked to issue suitable instructions to their branches or controlling offices for meticulous and strict compliance in this regard.

The notification came after a number of complaints were lodged by students who claimed they were refused educational loan as the residence of the student did not fall under the bank's service area.

It added that the service area norms needed to be followed only in case of government sponsored schemes. In the financial year ended 31 March, 2012, the gross credit towards education loan of banks was at Rs502 billion from Rs437 billion in the previous fiscal, as per the RBI data.

Meanwhile, the finance ministry today said it was in talks with the Reserve Bank on the issue of new banking licences.