Don't reject educational loan applications, RBI tells banks

Regulator also directs banks to issue suitable instructions to their branches or controlling offices for meticulous and strict compliance in this regard

The Reserve Bank today asked banks not to reject any educational loan application even if the residence of the borrower does not fall under their service area.

"... Banks are advised not to reject any educational loan application for reasons that the residence of the borrower does not fall under the bank's service area," RBI said in a notification today.

RBI has further asked the banks to issue suitable instructions to their branches or controlling offices for meticulous and strict compliance in this regard.

The apex bank issued the notification in view of number of complaints where students were refused educational loan as the residence of the student does not fall under the bank's service area.

It also said that the service area norms should be followed only in the cases of government sponsored schemes.

In the financial year ended March 31, 2012, banks' gross credit towards education loan was at Rs 502 billion from Rs 437 billion in the previous fiscal, as per the RBI data.