Leelavathi (SE) 04 August 2011

Need advice in repaying education loan

Hello everybody,

I'm new to this site. I hope I will get some advice from you how to handle my problem. I took an education loan of Rs 82,000 in Central Bank of India on 2003 for my studies. We have given our house document for security. I couldn't get a job because I couldn’t get my mark sheets and certificates from the university due to some problems with the college till end of 2006.

Though i got a job in the 2007, I couldn't repay my loan due to other unavoidable circumstances. I paid Rs 5,000 as interest on Jan, 2009. On May 2011, I got an intimation letter from bank asking me to repay the loan. I met the branch manager, he said my loan amount has grown to Rs. 16,0270. I accepted my mistake and to pay back the loan in 14 EMI.

I paid Rs. 15,000 in first installment and transferred EFT of Rs. 11,000 as second installment. Added with other bills, paying Rs. 11,000 as EMI, I felt it as big pain and decided to pay back the remaining amount in single shot. I enquired the manager and he agreed to close my loan account if I pay all my balance.

I transferred EFT of Rs. 1,34,000, now, manager refuses to close my loan account, says my total outstanding balance as of date is Rs. 2,15,000 and asking me to pay Rs. 55,000. The reason he said is, after some period of waiting for interest from the account holder, if they didn’t receive any interest, the account will be moved to "Not Paying" state and system will stop calculating the interest towards the loan amount.

When the loan holder starts repaying the loan, the system will calculate the interest from the time it stopped adding the interest to till date.

1. Can anybody advice me how I should deal this problem?

2. Is the reason given by manager correct?

3. Do I still need to pay Rs. 55,000?

Sorry for the long post.

Thanks

Leela.

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3 Replies

A. A. JOSE (LAWYER; LEGAL ADVISER/CONSULTANT& TRAINER) 04 August 2011

First of all, you may refer to the Loan documents executed between you and the Bank concerned and find out as to whether there are any conditions/provisions stipulated in the same to substantiate the stand of the Bank Manager or not. If not, you may approach Banking Ombudsman under whose jurisdiction your Bank is located or other legal remedies, including raising complaint in the local Consumer Forum. If there is specific condition in the loan documents, you have little option and in such case it would be advisable for you to represent before the higher Officers of the Bank explaining reasons as to why you were unable to make payment of interest/instalment of principal amount so far, and request for a sympathetic consideration of your case to waive the penal interest, if any,etc.

With best wishes,

Kumar Doab (FIN) 04 August 2011

Learned Mr.Baroda has given valuable advice. Kindly follow it.

If you do not have a copy of the loan agreement, you can collect it from bank. As per RBI guidelines bank is under obligation to supply you a certified copy of all documents, on which you have signed, pertaining to your loan a/c.

If "Not Paying" status and its implications are stated in your loan agreement, you may studt these carefully. If these are not stated then you are within your rights to obtain it from the bank, and bank is under obligation to supply it to you.

The calculation of interest is as per set mathematical formulae, and you can obtain it from bank. Bank may state that system calculates, but can not deny to supply you the formulae by which system calculates.

The penalties, interest are also described in your loan agreement.

You should ask for all docs and details and information from BM first in writing (under acknowledgment) and ask to supply these to you by registered/speed post, say within 7 days Kindly put the whole matter in writing and record every visit to BM.

If BM does not supply these you can submit a written representation (under acknowledgment) to the Nodal Officer, and MD of the bank and ask them to supply these say within 7 days.

You can also obtain these by raising RTI application. On obtaining these you may do your own calculation or take the help of a lawyer or CA and if any variance is found you can point out to bank and demand reversal.

SACHIN AGARWAL (ADVOCATE) 04 August 2011

It is a system of accounting in all Banks in India that in case the loan is not repaid in time, the account is declared "NPA" by the Bank and since the date of NPA, the interest is not calculated but it is the liability of the borrower to pay interest for the period for which the interest has not been calculated. It is calculated at the time of final payment. It is under RBI Guidelines.

Further, if yo have any finalcial problem, you can pu or problems before the Bank and the Bank may grant rebate on interest if your problem is found satisfactory to them.