Facing EMI Struggles with Educational Loan: Can I Legally Retrieve My Documents?

I had an educational loan amounting to 3.6 lakhs for the period 2011-13. They collected my house papers and my brother's insurance bond paper. When I checked my subsidy status, it showed Rs. 1451 for 2010-11 and Rs. 27551 for 2011-12, but I didn't receive any subsidy for 2012-13 and 2013-14. I started paying the EMI from June 2014 to November 2015 when I was employed. Now, I am jobless and unable to pay the EMI at the moment.

Legal Actions and Document Retrieval

What legal actions can the bank take based on the documents I submitted? Can I retrieve my documents through any legal process since my loan amount is less than 4 lakhs? Do they have the right to keep my original documents? Am I eligible for a one-time settlement? Please suggest what I should do in this situation.

Steps to Address Loan Repayment Issues

A bank can file a suit for the recovery of money from you. When are you likely to get a job? Go to the bank and explain your problem. Can you start making some payment at least? Ask the bank for relief from interest, stating that you are jobless and from a poor family. Proof of income will be needed. Request the bank to restructure the loan and extend the period for repayment. Speak to the manager and seek his advice and help. The moment the bank feels you genuinely want to repay but are stuck, they will try to help out. How much have you repaid, and how much balance is left? Show the bank your payment record when you were in a job.

Hi NATHRAO, Thank you for your reply.

As per IBA guidelines, branches should not demand collateral security, margin, and third-party guarantee for loans less than 4 lakhs. Can I take any legal action against the bank to keep my original documents? I have paid around 1 lakh, and approximately 5 lakhs are left. They are not cooperating. Could you please tell me the one-time settlement procedure?

Don't think of legal action. If you have money to initiate legal action, use the amount to repay the loan. When you wanted the loan, you didn't bother about IBA guidelines and gave all original documents, and now you talk of guidelines. One-time settlement is at the bank's discretion; please speak to the bank and try to settle. The bank will settle provided they feel what you are telling is the truth and to avoid loss may strike a deal. It is not mandatory that they accept your contention easily.

Addressing Non-Cooperation from Branch Authorities

If branch authorities are not cooperating, you may write to the Customer Grievance Officer of the concerned bank at their Head Office, requesting more time for repayment. Please bring to their notice that, as per the IBA Model Education Loan Scheme 2015, banks can consider a moratorium for reasons such as underemployment or unemployment. They may grant a repayment holiday of 6 months. Use this time to search for a job.

By voluntarily surrendering your LIC policies, you have limited options for challenging the bank. You have already agreed to the terms and conditions set by the bank. Pursuing legal action is unlikely to result in a favorable outcome and would entail spending money on a lost cause. Focus on repaying your overdue installments promptly to improve your credit history and ultimately your credit score.

I am afraid some of the above suggestions are too harsh. It is obvious that the bank paid scant attention to the statutory guidelines (please see attachment) while sanctioning the loan. Such guidelines constitute the public policy in sanctioning the educational loan. It is the norm that no collateral security, margin, or third-party guarantee is required for loans less than 4 lakhs. It is well settled that there cannot be any term of contract against public policy.

Moreover, even otherwise, consent to the terms and conditions stipulated by the bank could not have been informed consent. Invariably, while sanctioning the loans, the loanee is a minor. It is the general scenario that the bank obtains the signature of the student and their guardian (many of whom have little knowledge of English) on the standard terms and conditions (always in English) when they approach the bank for the loan.

In the given scenario, there is nothing alarming if the bank approaches the civil court. It will provide an opportunity to correct the inherent anomalies in the terms and conditions.

Rate of Interest

Most importantly in this context is the Rate of Interest. Even though guidelines provide that the rate of interest should be the prime lending rate, the banks impose a higher rate.

Regards

Thank you to everyone for your replies. In this case, my legal action is not related to the court. My concern is to approach the higher authority of the bank or government through mail or an application.

@nathrao, I was not initially aware of the IBA guidelines. I have now familiarized myself with these rules through the internet.

I would like further clarification on whether there is a process or opportunity to claim my previous subsidy that I missed during my study period, as well as one year after that.

The application for reimbursement of subsidy has to be submitted by your bank to the Nodal bank within the specified period only. Since I do not have details as to which period the subsidy belongs and also whether you are eligible under the scheme or not, the best way is to put the ball in the court of the banker. Submit an application asking for credit of subsidy. Let the banker say yes or no. If no, please do ask for the reasons.