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Banking regulation act,1949

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Praveen JayRam

A student applied for an educational loan from Canara Bank after completing his first year of an MBA program with good grades, but was denied based on his lower undergraduate grades. He filed a writ petition arguing he should qualify due to his current performance and that the bank's policy only applies to undergraduate programs. The bank and court maintained that the policy aims to only support students likely to find employment and repay loans. It is in the bank and public's interest to consider both current and past academic performance when determining loan eligibility. The petition was dismissed.

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By Puja & Praveen VSA Kasinathan Branch Manager
A Kasinathan Vs The Branch Manager CASE:A Kasinathan Vs the Branch Manager Court : Before Chennai High Court Judge : V. RAMASUBRAMANIAN, J. Decided On:Dec-12-2011 Act: Banking Regulation Act,1949 Sections : Sec 21,Sec 35A Petitioner: A Kasinathan Respondent: Branch Manager (Canara Bank) Abstract: The petitioner passed BBA course from the American College, Madurai in the year 2007. In the year 2010, he got admission to the MBA course in NPR College of Engineering and Technology,Natham, Dindigul district, Tamil Nadu under the management quota. After completion of the first year and after joining the second year of the course, the petitioner gave a representation to the respondent-Bank for the grant of oan educational loan of Rs 1,43,000. Since there was no response, the petitioner has come up with the writ petition.
Petitioners Contention: The petitioner(A Kasinathan) passed BBA course with 48.4% marks from the American College, Madurai in the year 2007. In the year 2010, he got admission to the MBA course in NPR College of Engineering and Technology, Natham, Dindigul District,Tamil Nadu under the management quota. After completion of the first year with 77% marks and after joining the second year of the course, the petitioner gave a representation to the respondent-Bank(Canara Bank) for the grant of loan educational loan of R1,43,000. But respondent claimed that the petitioner has secured only 48.4% and Since there was no response, the petitioner has come up with the writ petition.
Respondents Contention: Mr.A.Haja Mohideen, learned counsel for the petitioner raised two contentions: The first is that the purpose of grant of educational loan is to encourage poor students to pursue higher education without being handicapped by the lack of financial resources. The petitioner has secured 77% marks in the first year MBA Examination and hence, the respondent could consider the grant of loan to the petitioner. The second contention of the learned counsel for the petitioner is that the Circular relied upon by the respondent applies only to Under Graduate Courses and not to Post Graduate Courses, since the reference to 60% marks is in respect of Board Examinations. The learned counsel for the petitioner also relies upon the judgment of a Division Bench of this Court in W.A.(MD) No.23 of 2011 dated 11.1.2011.
Circular: It is seen from Circular bearing No.83 of 2011 issued on 17.3.2011 by the Head Office of the Canara Bank that the Bank Started implementing the Model Educational Loan Scheme formulated by the Indian Banks' Association. The relevant portion of the Circular dated 17.3.2011 issued by the Head Office of the respondent-Bank is as follows: In case of students who have secured admission under 'Management Quota', Educational Loan can be considered only if students have secured 60% marks in the Board Examination. However, students who secured admission under State selection process but opt for 'Management Quota' for a different Branch/stream can be considered under IBA Scheme. It is but common knowledge that many of the self-financing institutions flourish only on the basis of the seats filled up under the management quota and that therefore merit takes a back seat in the matter of admission of students under the management quota. Therefore the prescription of 60% marks in the qualifying examination, for a student admitted under the management quota, to be eligible for the grant of educational loan, cannot be found fault with.
Sections: Section 21(2):The Banking Regulation Act, 1949 empowers the Reserve Bank of India to determine the policy in relation to advances to be followed by Banking Companies, if RBI is satisfied that it is necessary or expedient in public interest to do so. The matters in respect of which the RBI may give directions to Banking Companies, are enlisted in clauses (a) to (e) of sub- section (2) of Section 21. They are (i) the purposes for which advances may or may not be made (ii) the margins to be maintained in respect of secured advances (iii) the maximum amount of advances that may be made to any one Company, Firm or Association (iv) the maximum amount upto which guarantees may be given by a Bank on behalf of an individual and (v) the rate of interest and other terms and conditions. Under sub-section (3) of Section 21, every Banking Company shall be bound to comply with any directions given to it under this Section.
Section 35-A:Section 35-A also empowers the Reserve Bank to issue necessary directions to Banking Companies, if such directions are necessary in public interest or in the interest of banking policy or to secure the proper management of the Banking Company.
Judgement: The object of providing educational loan is to ensure that the lack of financial resources does not dissuade poor, but meritorious students from pursuing higher education. If the Bank considers that the student has any other handicap, such as lack of merit, it is open to the Bank to refuse to advance loan. After all, the Scheme envisages the recovery of the loan after the completion of studies and after the student takes up employment. The Court cannot presume that every failed student may hit a jackpot like Steve Jobs of Apple Inc. Out of hundreds of students who perform poorly, one may turn out to be successful in life. His success story may be a source of inspiration for many, but not for the bank to gamble with public money.
Judgement: The prescription of a minimum percentage of mark for students admitted under the management quota is to ensure that the student has employment potential. If the student has employment potential, the loan may not become a non-performing asset. But a student, who is not meritorious, may himself turned out to be a non-performing asset both to his parents and to the Bank. Therefore, no direction can be issued to the Bank to grant loan to the petitioner in violation of the policy framed by the IBA to fix cut off marks as 60%, for those who secured admission under the management quota, to be eligible for the grant of educational loan. Hence, this writ petition is dismissed.

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Banking regulation act,1949

  • 1. By Puja & Praveen VSA Kasinathan Branch Manager
  • 2. A Kasinathan Vs The Branch Manager CASE:A Kasinathan Vs the Branch Manager Court : Before Chennai High Court Judge : V. RAMASUBRAMANIAN, J. Decided On:Dec-12-2011 Act: Banking Regulation Act,1949 Sections : Sec 21,Sec 35A Petitioner: A Kasinathan Respondent: Branch Manager (Canara Bank) Abstract: The petitioner passed BBA course from the American College, Madurai in the year 2007. In the year 2010, he got admission to the MBA course in NPR College of Engineering and Technology,Natham, Dindigul district, Tamil Nadu under the management quota. After completion of the first year and after joining the second year of the course, the petitioner gave a representation to the respondent-Bank for the grant of oan educational loan of Rs 1,43,000. Since there was no response, the petitioner has come up with the writ petition.
  • 3. Petitioners Contention: The petitioner(A Kasinathan) passed BBA course with 48.4% marks from the American College, Madurai in the year 2007. In the year 2010, he got admission to the MBA course in NPR College of Engineering and Technology, Natham, Dindigul District,Tamil Nadu under the management quota. After completion of the first year with 77% marks and after joining the second year of the course, the petitioner gave a representation to the respondent-Bank(Canara Bank) for the grant of loan educational loan of R1,43,000. But respondent claimed that the petitioner has secured only 48.4% and Since there was no response, the petitioner has come up with the writ petition.
  • 4. Respondents Contention: Mr.A.Haja Mohideen, learned counsel for the petitioner raised two contentions: The first is that the purpose of grant of educational loan is to encourage poor students to pursue higher education without being handicapped by the lack of financial resources. The petitioner has secured 77% marks in the first year MBA Examination and hence, the respondent could consider the grant of loan to the petitioner. The second contention of the learned counsel for the petitioner is that the Circular relied upon by the respondent applies only to Under Graduate Courses and not to Post Graduate Courses, since the reference to 60% marks is in respect of Board Examinations. The learned counsel for the petitioner also relies upon the judgment of a Division Bench of this Court in W.A.(MD) No.23 of 2011 dated 11.1.2011.
  • 5. Circular: It is seen from Circular bearing No.83 of 2011 issued on 17.3.2011 by the Head Office of the Canara Bank that the Bank Started implementing the Model Educational Loan Scheme formulated by the Indian Banks' Association. The relevant portion of the Circular dated 17.3.2011 issued by the Head Office of the respondent-Bank is as follows: In case of students who have secured admission under 'Management Quota', Educational Loan can be considered only if students have secured 60% marks in the Board Examination. However, students who secured admission under State selection process but opt for 'Management Quota' for a different Branch/stream can be considered under IBA Scheme. It is but common knowledge that many of the self-financing institutions flourish only on the basis of the seats filled up under the management quota and that therefore merit takes a back seat in the matter of admission of students under the management quota. Therefore the prescription of 60% marks in the qualifying examination, for a student admitted under the management quota, to be eligible for the grant of educational loan, cannot be found fault with.
  • 6. Sections: Section 21(2):The Banking Regulation Act, 1949 empowers the Reserve Bank of India to determine the policy in relation to advances to be followed by Banking Companies, if RBI is satisfied that it is necessary or expedient in public interest to do so. The matters in respect of which the RBI may give directions to Banking Companies, are enlisted in clauses (a) to (e) of sub- section (2) of Section 21. They are (i) the purposes for which advances may or may not be made (ii) the margins to be maintained in respect of secured advances (iii) the maximum amount of advances that may be made to any one Company, Firm or Association (iv) the maximum amount upto which guarantees may be given by a Bank on behalf of an individual and (v) the rate of interest and other terms and conditions. Under sub-section (3) of Section 21, every Banking Company shall be bound to comply with any directions given to it under this Section.
  • 7. Section 35-A:Section 35-A also empowers the Reserve Bank to issue necessary directions to Banking Companies, if such directions are necessary in public interest or in the interest of banking policy or to secure the proper management of the Banking Company.
  • 8. Judgement: The object of providing educational loan is to ensure that the lack of financial resources does not dissuade poor, but meritorious students from pursuing higher education. If the Bank considers that the student has any other handicap, such as lack of merit, it is open to the Bank to refuse to advance loan. After all, the Scheme envisages the recovery of the loan after the completion of studies and after the student takes up employment. The Court cannot presume that every failed student may hit a jackpot like Steve Jobs of Apple Inc. Out of hundreds of students who perform poorly, one may turn out to be successful in life. His success story may be a source of inspiration for many, but not for the bank to gamble with public money.
  • 9. Judgement: The prescription of a minimum percentage of mark for students admitted under the management quota is to ensure that the student has employment potential. If the student has employment potential, the loan may not become a non-performing asset. But a student, who is not meritorious, may himself turned out to be a non-performing asset both to his parents and to the Bank. Therefore, no direction can be issued to the Bank to grant loan to the petitioner in violation of the policy framed by the IBA to fix cut off marks as 60%, for those who secured admission under the management quota, to be eligible for the grant of educational loan. Hence, this writ petition is dismissed.