The RBI-appointed committee does not say anything about the obstacles in the documentation process that prevents students from availing the loans
The Damodaran Committee on bank customer services has failed to address some key issues on education loans, like the absence of an authority to issue income certificates that are required to be produced to avail of interest subsidy benefit.
The committee has in its report that was released by the Reserve Bank of India (RBI) on Wednesday, said that the banks should ensure through the government subsidy or insurance facility, that the educational loans are properly priced, so no bright student is denied an educational loan to pursue higher studies. "The criteria for giving such loans should be well publicised through websites or advertisements to ensure transparency and non-discrimination in sanction of such loans."
Experts say that while it is good that the committee has advised banks to make the scheme more student-friendly and create awareness about the scheme, it has failed to point out the obstacles that are preventing students from taking advantage of the facilities like interest subsidy as they are unable to show an income certificate in the absence of the issuing authority. Overall, much was expected from the committee with regard to documentation and the repayment hassles students face over the loans.
Moneylife has reported that as many as 28 states and union territories have yet to designate the income certificate issuing authority, nearly a year after the central government finalised a scheme to provide interest subsidy on education loans for students from economically weaker sections. In the absence of an authority to issue the income certificates, students from several states are finding it difficult to avail of the interest subsidy on education loans offered by banks. (Read, "Students in 28 states fail to get interest subsidy on education loans")
According to the ministry, under the scheme formulated by the Indian Banks Association (IBA), full interest subsidy is to be provided during the period of moratorium on education loan for students for families with an annual income of less than Rs4.5 lakh.
The Damodaran Committee said in its report that it had talked to students on the scheme. "The committee received feedback that though the banks say they are liberal with the educational loan facility, the same has become very difficult as the banks have made the norms very stringent for obtaining such loans. In the meetings, students expressed a desire that there should be a non-discriminatory and transparent policy for giving educational loans. Students should have the information about eligibility on the website and also by way of advertisements, so that ineligible students do not waste time, effort and money in seeking loans from banks."
About students from rural areas, the committee said, "Feedback from rural students indicated that preference for high-end professional studies was not benefiting the average student from a rural area to get a loan to pursue higher studies." The report recommended that "the board approved policy for educational loans should indicate the minimum percentage in value or number of such loans which will be disbursed to students from rural areas."
The UK-based bank says the zero-balance facility applies only to the original account holder, but not to the second person when the individual account is converted into a joint account
If you have a zero-balance salary account with a foreign bank and want to convert it into a joint account with your spouse, you might want to think again before you do it. The joint account-holders will have to maintain a minimum balance in the account, as far as HSBC Bank is concerned.
Pune-based professor Anil Agashe and his wife discovered this strange bank norm when they applied to convert Mrs Agashe's salary account at HSBC Bank's Law College branch, into a joint account, in 2004. Mrs Agashe is an advisor at Max New York Life and her commission payments were regularly credited to her account, which was a zero-balance account that she opened in 2002.
When the Agashes approached HSBC Bank, the account was converted into a joint account, and no questions were asked. But subsequently, the bank also upgraded the account to a category that requires a minimum balance of Rs3 lakh, without asking either of the account holders.
When the Agashes discovered this 'upgrade' later, they complained to the bank and managed to convert it to a 'normal' savings account. But the minimum balance required in this case was Rs75,000-and the couple was required to submit an application! The zero-balance facility did not apply for this account. "My argument is, if we had not applied for an upgrade, why should we apply for the downgrade (to Rs75,000)?" asks Mr Agashe.
Again, Mr Agashe informed the bank that the account was originally a zero-balance account. Only then did HSBC inform the account holders that the zero-balance facility was available to the first account holder and the joint account now required a minimum balance of Rs75,000.
Talking to Moneylife, Professor Agashe expressed his surprise saying, "How can you have two different rules for one account? If they (the bank) knew it was a salary account, why did they change it to a joint account in the first place?"
"I even asked them to make my wife the authorised signatory and give her all the rights to operate the account, with my name added on (as a nominee), but no (signing) authority for me. But the bank didn't listen," says Mr Agashe.
The Agashes met the bank's officer to enquire about the Reserve Bank of India (RBI) guidelines on this issue. "When I told the officer that the RBI does not make such a distinction, he said that HSBC has its own rules! I even told him that his (HSBC Bank's) rules could not be at variance with RBI guidelines. The officer insisted that 'HSBC is a foreign bank and therefore we can make our own rules irrespective of what the RBI says'," said Mr Agashe.
When Moneylife contacted HSBC Bank, the spokesperson refused to comment, saying, "We don't comment on client's account details due to security reasons, and we will answer the queries of the concerned account holder."