Banking
How Canara Bank victimised borrower of an education loan

Canara Bank sanctioned education loan of Rs15 lakh and after the borrower completed his course, told him that it can sanction only Rs10 lakh. The borrower was made to pay interest on Rs5 lakh as the Bank termed it as overdraft

A general perception is that a public sector unit (PSU) bank would work by the book and would be less aggressive in penalising its good, regular customer. However Canara Bank in Mumbai has done just the opposite by blatantly charging clean overdraft rate of interest on an education loan. All this due to the mistake of the sanctioning authority.

 

On 9 April 2009, Canara Bank sanctioned an Education loan of Rs15 lakh to Parag Punjwani for pursuing post-graduate (PG) programme in management at International School of Business (ISB), Hyderabad. Full disbursal of the loan was done and Parag completed the course in April 2010.

 

Suddenly in June 2010, the Bank informed him that a loan of Rs15 lakh was not possible as the ceiling for education loan to study in India is only Rs10 lakh. The Bank then applied an interest rate of 9.75% for Rs10 lakh as education loan and 14.75% (applicable to over-draft facility) for the remaining Rs5 lakh of the sanctioned loan amount.

 

Over the next three years endless letters, requests, pleas and follow-ups with the bank by Parag continued, without any success.

 

This looks like a clear case of error on part of the Bank official/s that sanctioned the education loan or Rs15 lakh without knowing if there could be any ceiling limit.

 

If Parag was told of this limit at the outset, he would have arranged for the shortfall from other sources. But as a result of this mistake, he was being penalised and forced to pay excess interest at the rate of 5% on outstanding amount of over Rs10 lakh. All this while, he was paying regularly his equated monthly instalments (EMIs) without any delays or disruption.
 


Finally, in April 2013, out of frustration on the issue being dragged on for so long, Parag filed a formal complaint before the Bank's Complaint redressal cell and later to the Banking Ombudsman.

 

Thereafter, the Bank agreed to refund all excess interest. Parag received this message over a telephone call from the Bank's Head Office (HO). Nothing in writing was issued either by the HO or by the Bank. The branch (from where Parag borrowed the money) said that it would refund Rs31,960 which was due as per their calculations. However the actual refunds were in excess of Rs80,000.

 

In the last week of July 2013, Parag was asked (by the Bank) to submit detailed calculations of the refund amount. He informed the bank that the excess amount deducted was Rs80,696. In August 2013, the amount of Rs80,696 was refunded into the loan account of Parag. It was a huge relief to the customer who felt harassed and victimised for no fault of his. Only his conviction saw him through this trauma and he was able to take on the might and muscle power of a large PSU bank.

 

There are a few issues, which can be highlighted and learnt from this incident:

1) Customers should read all communication from the bank carefully. Do not tear away/ destroy communications before reading through. It could be levy of extra charges or hike in interest rates.

2) Do not believe that the Bank deals with numbers and is fully automated, so will be always correct. Empower yourself with the knowledge of basic banking rules, interest calculation methods, look for extra debits of charges in the account statement and do not hesitate to ask for explanation from your Banker.

3) While taking up a controversial issue with your Banker, do not continue talking to them on phone or meeting them. Create a trail by way of letters and emails, which will come in handy at a later date. Even after a meeting, drop them an email mentioning the face-to-face discussions held.

4) The last resort help is by way of Consumer Redressal Forums and Banking Ombudsman. They have certain processes and time frames, which need to be followed. It would be helpful to know such details and abide by them, when writing to such authorities.

5) Give wide publicity to such incidents so that more people are aware of how Banks and Financial Institutions fleece innocent customers - sometimes to line their own pockets and sometimes to save their own skin.

User

COMMENTS

nagesh kini

3 years ago

Vital issues that need to be clarified -
1. Was the fact that the limit for studies in India is Rs.10l ( and not Rs.15l explicitly disclosed in the bank's website before the loan was sanctioned?
2. If the limit was in deed Rs.10l why was Rs.15l sanctioned at all for studies in India?
3. The bank is absolutely wrong in later on claiming as well as charging interest at a much higher rate.
4. The branch can't come round later to blame its controlling authority - its Circle Office - both of them are guilty for sheer negligence.
5. On what basis was the refund worked out? Does the bank expect every customer to sit down to calculate the interest workings?
6. How was a round sum of Rs.31,960 in the first place worked out when the actual amount charged was Rs.8o,696 which was conceded by the bank and ultimately refunded?
7. Customers GENERALLY tend to trust the bank and even sign DPN and other documents in blank and accept all debits at face value.
8. With this case all implicit trust in banks is lost and we all need to be double careful.
9. Had the borrower not been persistent the bank would have taken him for a jolly good ride. His efforts paid off in the long run.
10. Who in the bank is to be held responsible for his unwarranted mental harassment?
11. How effective is the Bank's in house redressal mechanism?
12. What steps has Canara Bank taken to prevent recurrance of such unjustified harassment?
13. This is a fit case to be dealt with at the Board level of Canara Bank.

JVIS Engineering

3 years ago

CANARA BANK ALSO HAVE THE REGULAR PRACTICE OF TAKING THE SIGNATURES ON BOTH THE BOTTOM OF EACH UNFILLED BANK FORMS AS WELL AS ON THE MARGINS OF THE SAID UNFILLED PAGE.

WHAT I LEARNT AFTER BURNING OUR FINGERS DUE TO THE FRAUD PLAYED UPON US BY THE CANARA BANK OFFICERS IS THAT THE MEANING OF SUCH SIGNATURES ALLOW THEM TO DO CORRECTIONS ON ANY OF THE LOAN PAPERS AT THEIR WILL AND WISH AS PER THEIR OWN WHIMSIES AND FANCIES TO FORGE PAPERS SO THAT THE POOR BORROWERS CAN BE TAKEN FOR A RIDE....

DEAR CUSTOMERS OF THE BANK BEWARE OF THESE GUYS AND DO NOT GET CHEATED BY THESE BANKERS....BETTER TRY TO DEPEND UPON YOUR FRIENDS AND RELATIVES FOR YOUR LOANS AND NOT ON THESE BANKERS......ELSE YOU SHALL BE THROWN OUT OF YOUR OWN HOUSE BY SUCH ACCOUNTING AND UNETHICAL FRAUDS...

JVIS Engineering

3 years ago

From the above complaint it is clear the Canara Bank and its officers played fraud on this poor chap.

My case is similar wherein the Canara Bank officers forged security papers to justify their fraud of not taking the risk cover under CGTSI scheme guaranteed by the Government of India. ANY HOW ALL THE FELLOW FRAUDSTERS SHALL KEEP JUSTIFYING THE SAME TILL THE TIME ONE MAN WITH CONSCIENCE COMES IN PICTURE OF THE BANKING SYSTEM AT LEAST IN THE SAID BRANCH OF THE BANK. ALL THE BEST TO THE POOR BORROWER AND WISH THAT HE PRAYS TO GOD TO SAVE HIM FROM THIS CROOKED BANK FELLOWS.....

vaidya

3 years ago

morever the condition for repayment also remains the same,and the repayment may start only after end of the period and after the borrower go the appointment.But int as per origianl terms of santion is become due and payable every quarter and his parents have to pay.

vaidya

3 years ago

Once amt of loan of 15 lacs sanctioend in writing,it can not change the terms and conditions &also change later without the consent of the borrower.If the borrower fully utilised the loan by way of fees, books, & maintenace with out any amt left, Bank has to abide by the terms and conditions of the original sanction only and can not charge any increase in the rate of int too.

vaidya

3 years ago

BANK HAS CHARGED CLEAN RATE OF INT OVER PART OF THE ALREADY SANCTGIONED LOAN OF 15 LACS,SINCE THISIS NOT BACKED BY ANY SECURITY.IF THE BORROWER OR HIS FATHER FURNISH ANY OTHER COLLETERAL BY WAY OF DEPOSIT OF TITLE DEEDS TO HIS PROPERTY, THE RATE OF INT IS BOUND TO COME DOWN CONSIDERABLY AS PER EDUCATION LOAN SCHEME.HE CAN BE ADVISED BY THE BANK ITSELF.

REPLY

Chaitali Dutta

In Reply to vaidya 3 years ago

BTW the loan was fully secured by way of extension of charge on the borrowers property for the full amount of 15lacs.

vaidya

3 years ago

AN EDUCATION IS SANCTIONED AND DISBURSED.AND THEREFTER BANK CAN NOT MODIFY THE SANCTION.ONCE A EDUCATION LOAN FOR 15 LACS.AND NOW BANK WANTED TO BRING PART OF THE LOAN UNDER YOGANA SCHEME WHICH IS ONLY BENEFICIAL TO THE BORROWER.AND SINCE HE HAS TO REPAY, HE CAN ALWAYS ADJUST FOR A SMALLER LIMIT AND FURTHER REDUCE HIS COMMITTMENT.HOWEVER, IT IS FOR THE BORROWER IS TO ACCEPT THE MODIFICATION AND CAN NOT BE FORCED ON HIM.

vaidya

3 years ago

tHEbANK COULD HAVE INFORMED EVEN BEFORE ACTUAL DISBURSEMENT OF ENTIRE 15 LACS, INSTEAD OF INFORMING LATER ABOUT,SINCE IT IS AT FAULT OF NOT INFORMING OR RESTIC ITSELF TO 10 LACS ONLY.LATGER MODIFICAION OF ANY LOAN ALREADY GRANTED IS NOT CORRECTG.

Deepak Mohan

3 years ago

I had used Canara bank for my own education loan - while painful in process they gave me a loan, so we approached them for my brother's education loan as well. The loan repayment allows 1 year from end of education or job whichever is earlier - since he had to move out of the country and return back, he did not apply for a job - we had informed the bank about this and indicated to them that we will commence repayment after 12 months or if he finds a job earlier - suddenly 1 day few officers start calling home from their recovery cell and asking for repayment else they will invoke SARFESI !!! Took us multiple visits to sort this out. Post that they refused to setup a standing instruction to take money out from the SB account - so every single month we had to go to the branch to make the payment !!! - Not going anywhere near Canara bank ( & BTW my mother is an ex employee from Canara bank !!! )

REPLY

Chaitali Dutta

In Reply to Deepak Mohan 3 years ago

I totally agree with you, Deepak. It is incidents like this which leave a bad impression and force us to move away from the institution in future. Customer awareness is on the rise and the services sector cannot get away with soddy handling of situations.

nagesh kini

In Reply to Deepak Mohan 3 years ago

Canara Bank seeking to invoke SARFESI more particularly, when the matter is very much alive, is extremely reprehensible and needs to be looked into and curbed by the controlling authorities at the highest levels.
This is plain and simple harassment of genuine borrowers,while on the other hand they go extremely easy on big chronic defaulters with all sorts of 'incentives' in the form of waivers and deferments in the name of 'corporate debt restructuring'.
Just because there are rising NPAs in the segment of the unsecured below Rs.4lakhs education loans which they are unable to manage, it doesn't permit them to go hammer and tongs against small borrowers who they know for certain will not go to court.Catch the big fish first and then chase the smaller ones!

vaidya

In Reply to Deepak Mohan 3 years ago

whether ur mother if x CB, allthemore u hve to adhere to the rules and pay promptly.and u should thank having giventhe laon and promptly pay as per terms sicne not many banks extents educaitonloan like CANARA BANK, FOR A LONG TIME.

nagesh kini

3 years ago

The RBI and IBA have clearly laid out Guidelines on Education Loans.That Canara Bank's internal Grievances Committee couldn't decide and force the student to approach the Banking Ombudsman is indeed a sad commentary on what is considered to be pioneer bank on Education Loans.
This student's efforts should be an eye opener to all students and bankers too!

vaidya

3 years ago

For a long term education Loan of more than 5 years and over, and for a good amt.Bank must have taken a LIC policy to that etent of loan amt with int.,so that incase of any exisgencies as party emigrates/expires, bank can als ways encash the LIC policy,provided the premium are paid well inadvance from loan amt granted.Party is safe and Bank is also safe.Term and condition can not changed either by the bank or the borrower once laid while granting.and there should mutual stamped agreement to be signed by both in this regad and also the guarantor/guardian

Iyer

3 years ago

The Bank seems to have forgotten the basic rule of being a customer friendly entity ,instead of traumatizing the borrower they should have had an approach which could have been solved in a better ,customer friendly manner as the basic mistake was with the Bank official who had been negligent and ignorant in knowing the loan limits for Vidyasagar loan .
By this harassment they have driven away good future customer as this borrower would have been a good ,loyal customer as he has next 30 to 40 years of income earning capacity,a very unfortunate incident where the bank must train its official in the right manner.

vaidya

3 years ago

Canara bank is one of the pioneers in Education Loan to all eligible students and many students got the benefits and paid after getting into employment.Hence this incident is rather rare and once the applicant appeal tothe authrorities,they will agree to consider, since the repayment are being made promptly.

REPLY

Chaitali Dutta

In Reply to vaidya 3 years ago

Dear Vaidya,
Education loans fall under priority sector banking and hence should be dealt with care. The Bank may have sanctioned millions of such loans, but the fact remains that irresponsible handling of one customer, has a long term and wide repercussions.

vaidya

3 years ago

it is not fair for the bank to revise its terms on theamt alrfeadylend as per sanction,theborrower has to pay as int rate in equatedinstalement and any other extra int if charged has to be taken back.Normally it does not happen.Perhaps it is the mistake of CM having sanctioned in excess of 10 lakhs and he has to get ratification from HOin this regard.

TIHARwale

3 years ago

Canara Bank officer would have confused Hyderabad of Pakistan and once he realised the mistake they have sought higher interest and when Ombudsman explained Hyderabad is India even though for some it may be a disputed territory for the politicians of Andhra Pradesh and Telangana

Sensex, Nifty likely to head higher: Thursday closing report

Nifty has gone above the first of three short-term indicators we track. It has to close above today’s high for the upmove to continue

Today the indices opened in the positive and edged higher each time after a minor dip – until a selloff in the end. The market was expected to be volatile on account of the expiry of the futures and options contract. The National Stock Exchange (NSE) recorded a volume of 87.05 crore shares, among the highest on an expiry day.

 

The Sensex and the Nifty opened with a gap up at 18,074 and 5,317 respectively. Soon they hit their respective lows. The Sensex hit a higher low of 18,071 while the Nifty hit a higher low of 5,303. Towards the end of the session the indices sold off sharply. The Sensex hit a high of 18,456 and closed at 18,401 (up 405 points or 2.25%) while the Nifty hit a high of 5,429 and closed at 5,409 (up 124 points or 2.35%).

 

Except for PSU Bank (down 0.46%) all the other indices closed in the positive. The top gainers were Infra (3.01%); Energy (2.97%); Finance (2.74%); Metal (2.71%) and Media (2.55%).

 

Of the 50 stocks on the Nifty, 38 ended in the green. The major gainers were Sesa Goa (12.83%); Hindalco (5.78%); HDFC (5.73%); Lupin (5.10%) and Kotak Mahindra Bank (4.92%). The major losers were Punjab National Bank (2.05%); UltraTech Cement (1.96%); Coal India (1.54%); Infosys (1.36%) and State Bank of India (1.06%).

 

The latest measure of Reserve Bank of India (RBI) to control the volatility in the currency market was taken on late Wednesday when the RBI decided to provide a special window with immediate effect under which the RBI will undertake sell/buy USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank.

 

The partially convertible rupee was hovering at 67.655 against the dollar, sharply higher than its record close of 68.80/81 on Wednesday, 28 August 2013.

 

Prime Minister Manmohan Singh told parliament he was likely to make a statement on the economy on Friday when asked by MPs what steps were being considered on the rupee.

 

Global rating agency Moody's Investors Service today said that the Indian government's plan to provide cheap grains to the poor is credit negative and will bring more pressure on the government's weak finances. The measure is credit negative for the Indian government because it will raise government spending on food subsidies to about 1.2% of GDP per year from an estimated 0.8% currently, exacerbating the government's weak finances, Moody's said.

 

The land acquisition bill, which provides extra protection for landowners whose property is bought for industrial development, was introduced in Lok Sabha today, 29 August 2013. The bill proposes to establish new rules for compensation for land acquired for infrastructure projects and industry, a move seen as raising costs but potentially reducing protests that have plagued India's industrialization drive. The bill calls for taking the consent of 80% of land owners for acquiring land for private projects and of 70% landowners for public-private projects.

 

Except for Shanghai Composite (down 0.19%) all the other Asian indices ended in the green. Jakarta Composite was to top gainer (up 1.92%). Speculation that geopolitical tensions arising from a possible US-led military strike against Syria may also lead the Fed to hold off the reduction in stimulus aided gains in Asian stocks.

 

Market now looks ahead for the US economic data that will reinforce the case for the Federal Reserve to slow stimulus. Data awaited is of US gross domestic product for the second quarter and that of US initial jobless claims.

 

Brazil's central bank on Wednesday raised its key lending rate by a half percentage point, reinforcing a commitment to curb worrisome inflation despite parallel concerns over the pace of economic growth. US indices ended in the positive on Wednesday and opened positive today. European indices were trading in the positive.

User

COMMENTS

Vinay Joshi

3 years ago

MLDT,

Please answer me, – IF AT ALL YOU CAN?

What is up move? When can it happen? How you expect w/o your analytics?

Nifty co’s foreign debt leveraged approx 40% exposures, their market cap have shrunken to approx 30-33% of its net debt!

Assuming you have factored in Q1 results & Q2 guidance & the fundamentals & the trend this statement IS OBNOXIOUS in view of sustain the rise.

The statement should have been – ‘Nifty possibility of high a myth’!!?? Short term fluctuations can’t reflect fundamentals & it has to swing with S&P BSE.

Tell me earning growths vis-à-vis interest expenses.
How do they service debt? What are the measures to cut debts? CAN EQUITY BE RAISED?
What are its saleable assets?

This is not restricted to Nifty but S&P BSE 500 cos, 30% of its market cap have fallen to FY13 net debt. Large they are & in Q2, what will be its scenario?

In this HPCL, Tata Power et al.

Talk fundamentals, if FII’s pump in & keep pumping in then Nifty can be 3x Nasdaq! Bourses have experienced 18xPE & FYI many analysts in CY12 had stated Sensex upwards of 20K, in CY11 predicted to be 22-24! Such is the hype.

Moody’s talking you state w/o they [OR YOU] ascertaining the positive/negative impact & THE POSSIBLE MEASURES CAN BE INITIATED!

SUCH HYPE OF ANY CREDIT RATING AGENCIES WAS FIRST JUNKED BY US ITSELF!? MLDT!?

Under the constitution of India an Indian citizen has ‘right to his property’. Why has the apex court not hearing decades old case & pronouncing the judgement? Similar to freezing 1995 slums – NO JUDGEMENT- yet SRA schemes are in vogue. MLDT fyi.

Under which provisions 1995 slums legal - PENDING DECISION OF THE APEX COURT! So in conformity SRA can’t be legal.

The newly appointed, academic economist, Guv. of RBI, takes charge Sept5, will only announce his policy after Sept 17-18 FOMC. When as an academic he should understand that FED is least concerned & bothered about its policy outward implications.
Later on he may even wait BoE to announce, if Mark Carney is ready to announce fresh stimulus.

Hope you ALL at ML have heard the outgoing Guv's speech last evening!

Regards,

Axis Global Equity Alpha Fund: More of the same

Global funds that put your money in other countries don’t necessarily offer much diversification

Axis Mutual Fund plans to launch another foreign fund of fund scheme— Axis Global Equity Alpha Fund. This scheme, like that of Axis Asian Opportunities Fund (Read: Axis Asian Opportunities Fund: Another global fund) would invest in a scheme of Schroders Plc. Schroders is a global investment company that manages around 580 funds globally with a total corpus of $388 billion. The scheme would invest 95%-100% of its assets in units of Schroder International Selection Fund Global Equity Alpha. The remaining part of the assets would be invested in debt or money market instruments. The target scheme was launched in July 2005 is one of the funds under the Schroder International Selection Fund. Under this scheme, at least two-thirds of the fund (excluding cash) will be invested in a concentrated range of shares of companies worldwide.
 

Schroder Alpha funds have a strategy to invest “in companies in which they have a high conviction that the current share price does not reflect the future prospects for that business. The fund will typically hold between 50 and 60 companies and has no bias to any particular industry or size of the company.”
 

As on 28th June 2013, over 50% of the assets have been invested in companies listed in America and around 20% is invested in companies listed in Europe. In terms of performance, the scheme has performed relatively well compared to its benchmark since inception and over the one-year and five-year periods. The top 10 holdings of the scheme includes: Microsoft, Roche Holding, Coco-Cola, Diageo and Occidental Petroleum. Idea Cellular is also one of the top 10 picks.
 

Long-term capital gains are tax-free for domestic equity mutual fund schemes. Investing in global funds will attract long-term capital gains which will be taxed at 20% with indexation and 10% without indexation.
 

Equities should be used to create long-term wealth. If an investor is looking to invest for the really long term, then, with the tax benefits included, investing in Indian equity schemes may be a better option than investing in global schemes. These schemes have made money recently because of rupee devaluation. Such gains may not last.
 

Sudhanshu Asthana, who has an experience of over 10 years, would be the fund manager of the scheme. The performance of the scheme would be benchmarked to MSCI AC Asia ex Japan Net TR index.
 




Read our earlier articles on global funds:
 

Global Funds: Lacklustre performance
 

Should You Chase the American (Equity) Dream?

 

Other details of the scheme
 

Minimum Application Amount Rs5,000 and in multiples of Re. 1/- thereafter
 

Minimum Additional Purchase Amount Rs100 and in multiples of Re. 1/- thereafter
 

Loads
 

Entry Load: Not Applicable
 

Exit Load:
 

3% if redeemed / switched - out up to 6 months from the date of allotment
 

2% if redeemed / switched - out after 6 months & up to 12 months from the date of allotment
 

1% if redeemed / switched - out after 12 months & up to 24 months from the date of allotment

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)