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Ankit (First Officer)     18 July 2013

Education loan default.

Hello All,

I had taken an Education Loan from SBI in the year 2006 to the amount of Rs. 17 lakhs. I went abroad for my studies and came back in 2007. As I understood from the banking norms, the moratorium period is supposed to be 1 year from completing the studies or 6 months from obtaining a job, whichever is lower. After one year of completing my course, I applied for the extension of the moratorium period which was granted by the bank. In short, my EMIs were supposed to start from October 2009. Till then, no amount was paid into the loan account whatsoever. Our family was in the worst state during that time till almost the beginning of 2013, where in my father and I were in a position to start paying the loan amount. All the while, the bank was informed in some way or the other about the current position.

 

As of April 2013, the bank stated that I had a total outstanding of Rs. 41 lakhs, including interest, calculated from the first day of the disbursal of the loan till April. I contacted the bank for a settlement since I have been able to amass a certain amount of money, more than what the bank had originally given me. I was offered a decent settlement of Rs. 32 lakhs, but on ridiculous terms, stating that I have to pay Rs. 20 lakhs upfront and pay the remaining Rs. 12 lakhs in six months installments, amounting to Rs. 2 lakhs per month. I informed that this is ridiculous and it is impossible for me to be able to shell out that kind of a money. I was shrugged off by the bank and they have sent a legal notice to my current employer seeking permission to attach my salary to recover the loan amount. 

 

There is a legal case going on in DRT and we have appointed a Lawyer to contest the case, and even after this, with the legal proceedings goin on, the bank is still pressurising me for payment of the entire amount of Rs. 42 lakhs now and it is impossible for me to be able to pay that kind of money. Also, we had mortgaged a property (current valuation Rs. 70 lakhs), and the bank says that they can't sell the property off as there are some issues in it and without selling the collateral they are wanting to take money off my salary through my company which would be really embarassing for me. I already offered them a setllement of Rs. 25 lakhs, but that effort was in vain.

 

Kindly help me as to what can I do in this situation. I am willing to make a one shot payment to them, but the bank is reluctant now and says no settlements can be done. I am still contesting the case in DRT and trying to fight it, but I would still appreciate any help that I could get from this community.

 

Regards,

Ankit



Learning

 9 Replies

MANOJ HARIT (LAWYER)     18 July 2013

Mr. Ankit,

The correct forum to present u r case is before the DRT. Raise all the issues and facts. Get u r self involved with the proceedings. Attend all the dates with through preparation. Do not worry as long as u have intentions to pay. Even if u want 10 yrs for repayment u r bound to get it. 

For any kind of clarification u may continue posting here.

Prashant Agnihotri (Lawyer)     31 July 2013

There is no big reason to worry,How SBI got information about your job,employers detail?.Keep seperate your job from these legal issues.& Don't give offer for settlement from your side to bank.Your case in DRT,don't show infront of it,you r capable to pay such a big amount. If they r pressurising you & if their behaviour is harsh,yo can file a police complaint against them & do video recording of their behaviour.

Ankit (First Officer)     08 August 2013

Dear Manoj Sir and Prashant Sir,

Thank you very much for valuable help. I am contesting the case in DRT, however now the Bank has sent a letter to my employer asking to attach my entire salary towards the loan account and I have received an email from my Finance division stating that I need to sort the issue out by 20 August 2013, otherwise the company will comply as per the legal proceedings. I am going to my lawyer tomorrow and making a draft and notice to SBI, Nagpur and sending a copy to my company to let them know that the case is in dispute and is under legal proceedings and my company should not comply with any requests made by SBI in regards to attachment of my salary. Any further help that you guys can give would be very much appreciable as I am stuck in a situation where I have a certain amount of money but because of the stupendously high loan amount, it is impossible, in my current state, to pay off such a huge amount.

Thanks.

malipeddi jaggarao (retired banker)     14 December 2013

Mr.Ankith,

You have availed education loan in 2006 Principal amount Rs.17 lakhs.

You have not paid any amount till 2009 and requested for reschedulement of EMIs for which bank accepted and you have not paid any thing till 2013.  

You have given some property as mortgage to the Bank.

In April 2013 the total loan quantified by the bank is around Rs.41 lakhs.

You offered a settlement for Rs.32 lakhs and bank insisted upfront Rs.20 lakhs and the balance in 6 months. 

The case is in DRI and you say that instead of selling away mortgaged property, the bank is trying to attach your salary. 

My reply is:

First of all when Education Loan is taken way back in 2006 and nothing is paid the amount will be naturally more than double the principal amount. Generally during the gestation period the interest charged is to be paid by the parent.  This is not done.  You have requested for reschedulement and bank agreed for it.  That means the interest charged will be added to principal and EMIs would be refixed.  The new EMIs are commenced in 2009 but you have chosen not to pay anything.  In such circumstnaces, the account becomes NPA and the bank will charge penal rate of interest. The accumulation of amount is because of the default and you can dispute it. 

Now you have offered a decent settlement of Rs.32 lakhs.  What do you mean by settlement?  It has to be paid at one shot (as you used this word, you are aware of it).  Bank agreed for upfront Rs.20 lakhs and balance in instalments.  If you feel that the instalments are burdensome, you should have asked for more number of instalments.  You say that property is mortgaged.  Bank would have chosen to realise the dues by selling away the property, but it appears there are certain problems for bringing the property to sale.  You might be aware of these deficincies at the time of mortgaging the property to the Bank. 

 

Bank has got every right to make all its efforts for recovery including writing to your present employers. The employers may advise you settle the issue but legally they can not attach your salary unless there is an attachment order of the court.   But this will project you in very bad light - a person who has taken education loan of Rs.17 lakhs for studies in abroad, but chosen not to pay even a single pie.  

I suggest that you should renegotiate with the Bank and pay one shot payment of Rs.20 lakhs and ask for 1 year time to clear the balance.  It is public money and given for a good cause and you should utilize such facility judiciously instead of fighting against the Bank which has helped you in your career. 

 

 

Vishva (Projects)     01 December 2014

Sir,

We have taken a education loan in the year 2007 and started repayment in the year 2009 till mid 2012  we have almost paid the Principal amount while interest is outstanding as on today and due to financial crunch we could not pay and restart repayment.

We have requested Bank to consider GOI's Circular on Education Loan Waiver which states as follows : -

Interim Budget 2014 in February by the then Finance Minister Chidambaram bring comforts to education loan borrowers stating moratorium period for all education loans taken up to March 31, 2009, and outstanding as of March 31, 2013. hence GOI would take the Liability for Outstanding Interest till 31st Dec 2013.

Now the Nationalized Bank has filed a case against my gurantor who is a pension holder, blocking her accounts and demanding money.

We are ready to cooperate but not a satisfactory answer received from them and they are forcing us to sign loan renewal letter.

and just now Bank' Lawyer has recently sent a letter to pension holder stating that your given cheque is not working and due to funds insufficient in account, we will take legal action against pension holder.

Irony is, we have not given a signed cheque to bank in recent 7 years so how they can do this.

Please let me have your thoughts on the same.


Regards,

Vishva

malipeddi jaggarao (retired banker)     02 December 2014

There is no such GOI's Circular on education loan waiver as far as my knowledge goes.  Please send the full particulars of such circular.  Might be it is an internal adjustment for flow of funds between the Government and the Banks and it will not extend any remission/relief to the borrowers of education loans. 

You have taken loan in 2007 by this time it would be more than double as per the contract rate of interest and after applying all the concessions to the education loans.  You plea that you have paid the principal for 3 years will not match the outstanding dues and you might have been classiified as defaulter.

You say that you are ready to cooperate!  For what?  Bank's cooperation is required, not yours.  It is public money lent to you at a reduced rate of interest with liberalised terms for a social cause.  Instead of searching for reasons, you should have paid the money back.

Bank has filed a case against the guarantor who is a pensioner.  What is the meaning of the guarantee?  If the principal debtor fails to pay the creditor has got every right to go against the guarantor solely, or both against borrower and guarantor as per his choice and recover the money.  Bank is right in filing the case against the guarantor for recovery. 

They are forcing us to sign the renewal document - Any promissory Note has got the validity for 3 years and later it will become legally unenforceable.  Hence the Bank periodically takes the renewal document.  You are not doing a favour to the Bank by executing this document.  Otherwise the Bank will be forced to go to court of law immediately before expiry of the limitation. 

Do not be too smart and better to repay your education loan.  If you really have genuine difficulties, discuss with the bank and seek some more time by requesting them to reschedule your EMI.  That is only the way you have before you. 

Vishva (Projects)     02 December 2014

Sir,

Thanks for your comment, glad you have replied.

Please refer corresponding circular of IBA (https://www.iba.org.in/Documents/CIR_9215.pdf) at your further perusal.

 

I do not know whether it is an internal adjustment for flow of funds or other things but you may please guide what is the significance of Education Loan Waiver under Interim Budget.

 

 

regards,

 

Vishva

 

malipeddi jaggarao (retired banker)     02 December 2014

Dear Vishva

Yes, it is the interest subsidy passed over to the Banks for extending concessional rate of interest educational loans to Economically Weaker Section students which has no relevance to individual education loans.   The rate of interest on Educational Loans is lesser than the priority sector lending rates and as such banks will incur loss for such lending.  To compensate the banks for such losses, the Central Government gives interest subsidy to the individual banks and individual educational loan accounts will not get the benefit out of this circular.  You have misread the contents and fighting with the bank on a wrong foot.  Please understand and try to clear the overdues if you can, otherwise, you request the bank manager to reschedule your educational loan account.

Best wishes

Jaggarao malipeddi.

SHOAIB (Infra Trainee)     08 June 2015

Respected Lawyers,
I have a Query related to my Education loan Settlement. I took a loan of 2 lakhs in the year 2008 for my Engineering graduation of 4 years(i,e 50,000/year) . I have paid about 70,000 since then and  most of the paid amount went as interest ,only part of it got credited to Principal amount due to late payment of the monthly isntallements. I now have decided to make setttlement for my loan as i am not in a sitaution to pay the montly installements regurarly. 

So can some one let me know that is their any way for me to get this out cleard by going with settlement, I  have already approached the bank Manger for this but he is not aggreeing with the settlement.

Is their any Rule where we can settle this.

Appreciate your guidence.


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