Following the recent suicide of Dalit youth K. Lenin, allegedly due to pressure tactics deployed by Reliance ARC – a private assets reconstruction company – demanding repayment of education loan, activists and a section of borrowers have alleged violation of norms by the State Bank of India in selling ‘non-performing education loans’ to the company.
In Lenin’s case, M. Raj Kumar, chief organiser of Education Loan Awareness Movement, said that though his repayment schedule must not have begun before June 2016, SBI had by then classified it as a non-performing asset and sold it Reliance ARC. .
“Lenin completed his engineering course in May 2014 but had a few arrear papers to clear. As per Indian Banks Association’s guidelines, a student can be provided two more years to complete the course, until which there will be a moratorium on repayment,” Mr. Raj Kumar claimed.
The apparent omission by SBI in applying the Central Interest Subsidy Scheme (CSIS) for the education loans was also highlighted. As per CSIS, for families with an annual income less than Rs. 4.5 lakh, the central government would fully subsidise the interest accrued until the moratorium period.
“Lenin was eligible for CSIS. Then how come the outstanding principal amount of Rs. 1.9 lakh jumped to Rs. 2.5 lakh within the moratorium period,” questioned N. Muthu Muniyandi, Lenin’s uncle.
‘Borrowers not informed’
SBI has also been accused of transferring the loans to Reliance ARC without the knowledge of borrowers. T. Balaji, a similarly affected engineering graduate from Ponnamaravathy in Pudukottai District, said that SBI officials assured him easy repayment schedule but later sold his loan.
“As I couldn’t repay my loan for two years due to my paltry salary, my family was summoned for Lok Adalat last December,” he said.
“When we approached the bank, they asked to pay the outstanding interest of Rs. 21,000 immediately and the remaining in instalments. Though my mother pawned her jewellery to pay the interest, my loan was sold and I knew about it only when Reliance ARC called me,” Mr. Balaji claimed.
Strangely, Mr. Balaji alleged that the letter he received later from Reliance ARC did not take into account his payment of Rs. 21,000.
“My outstanding balance had instead increased by another Rs. 25,000 within a span of a few months,” he said.
Activists allege that such transfer of loans is in violation of Banking Codes and Standards Board of India (BCSBI) guidelines, which stipulate that the banks inform the customers about changes to their loan accounts.
They also point out to the case of B. Rakesh, a hearing and speech impaired engineering student from Madurai, whose loan was sold to Reliance ARC even while he was studying due to a ‘technical error’ by SBI’s own admission.
Mr. Raj Kumar said that ever since Lenin’s death, he had been receiving similar complaints of unfair sale of loans from many engineering graduates who had taken education loans.
C.H. Venkatachalam, general secretary of All India Bank Employees Association, said that all these instances indicated gross violation of norms by SBI. “SBI had prematurely classified many of these loans as non-performing assets (NPAs) when they are actually not,” he said.
“Instead of selling the loan to Reliance ARC at heavily subsidised rates, why cannot SBI provide the same subsidy to borrowers so that they could repay in easy instalments?” he questioned.
He demanded the immediate intervention of the Tamil Nadu government in cancelling the sale of these loans so as to prevent the harassment of borrowers, particularly those from economically weaker sections.
Company rebuts
Denying allegations of a high-handed approach in recovering the loans, a spokesperson for Reliance ARC said that the company did not demand one-time settlement.
“Various options, including installment and discussion-based settlement are available,” he claimed.
On allegations of Reliance ARC buying loans that were prematurely classified as NPAs, he said that the classification was the responsibility of SBI and if there were any issues, it should have been addressed by SBI.
