banking regulation act,1949 case law

1.  By Puja & Praveen
VSA Kasinathan Branch Manager

2. A Kasinathan Vs The Branch Manager
 CASE:A Kasinathan Vs the Branch Manager
 Court : Before Chennai High Court
 Judge : V. RAMASUBRAMANIAN, J.
 Decided On:Dec-12-2011
 Act: Banking Regulation Act,1949
 Sections : Sec 21,Sec 35A
 Petitioner: A Kasinathan
 Respondent: Branch Manager (Canara Bank)
 Abstract: The petitioner passed BBA course from the American College,
Madurai in the year 2007. In the year 2010, he got admission to the MBA
course in NPR College of Engineering and Technology,Natham, Dindigul
district, Tamil Nadu under the management quota. After completion of the
first year and after joining the second year of the course, the petitioner gave
a representation to the respondent-Bank for the grant of oan educational
loan of Rs 1,43,000. Since there was no response, the petitioner has come up
with the writ petition.

3. Petitioners Contention:
 The petitioner(A Kasinathan) passed BBA course with 48.4% marks
from the American College, Madurai in the year 2007. In the year
2010, he got admission to the MBA course in NPR College of
Engineering and Technology, Natham, Dindigul District,Tamil Nadu
under the management quota. After completion of the first year with
77% marks and after joining the second year of the course, the
petitioner gave a representation to the respondent-Bank(Canara
Bank) for the grant of loan educational loan of R1,43,000. But
respondent claimed that the petitioner has secured only 48.4%
and Since there was no response, the petitioner has come up with
the writ petition.

4. Respondents Contention:
Mr.A.Haja Mohideen, learned counsel for the petitioner
raised two contentions:
 The first is that the purpose of grant of educational
loan is to encourage poor students to pursue higher
education without being handicapped by the lack of
financial resources. The petitioner has secured 77%
marks in the first year MBA Examination and hence,
the respondent could consider the grant of loan to the
petitioner.
 The second contention of the learned counsel for the
petitioner is that the Circular relied upon by the
respondent applies only to Under Graduate Courses
and not to Post Graduate Courses, since the reference
to 60% marks is in respect of Board Examinations. The
learned counsel for the petitioner also relies upon the
judgment of a Division Bench of this Court in W.A.(MD)
No.23 of 2011 dated 11.1.2011.

5. Circular:
 It is seen from Circular bearing No.83 of 2011 issued on 17.3.2011 by
the Head Office of the Canara Bank that the Bank Started
implementing the Model Educational Loan Scheme formulated by the
Indian Banks' Association. The relevant portion of the Circular dated
17.3.2011 issued by the Head Office of the respondent-Bank is as
follows:
 In case of students who have secured admission under 'Management
Quota', Educational Loan can be considered only if students have
secured 60% marks in the Board Examination.
 However, students who secured admission under State selection
process but opt for 'Management Quota' for a different Branch/stream
can be considered under IBA Scheme.
 It is but common knowledge that many of the self-financing
institutions flourish only on the basis of the seats filled up under the
management quota and that therefore merit takes a back seat in the
matter of admission of students under the management quota.
Therefore the prescription of 60% marks in the qualifying
examination, for a student admitted under the management quota, to
be eligible for the grant of educational loan, cannot be found fault
with.

6. Sections:
 Section 21(2):The Banking Regulation Act, 1949 empowers the
Reserve Bank of India to determine the policy in relation to
advances to be followed by Banking Companies, if RBI is
satisfied that it is necessary or expedient in public interest to do
so. The matters in respect of which the RBI may give directions
to Banking Companies, are enlisted in clauses (a) to (e) of sub-
section (2) of Section 21. They are (i) the purposes for which
advances may or may not be made (ii) the margins to be
maintained in respect of secured advances (iii) the maximum
amount of advances that may be made to any one Company,
Firm or Association (iv) the maximum amount upto which
guarantees may be given by a Bank on behalf of an individual
and (v) the rate of interest and other terms and conditions. Under
sub-section (3) of Section 21, every Banking Company shall be
bound to comply with any directions given to it under
this Section.

7. Section 35-A:Section 35-A also empowers the Reserve
Bank to issue necessary directions to Banking Companies,
if such directions are necessary in public interest or in the
interest of banking policy or to secure the proper
management of the Banking Company.

8. Judgement:
 The object of providing educational loan is to ensure that the
lack of financial resources does not dissuade poor, but
meritorious students from pursuing higher education.
 If the Bank considers that the student has any other handicap,
such as lack of merit, it is open to the Bank to refuse to
advance loan.
 After all, the Scheme envisages the recovery of the loan after
the completion of studies and after the student takes up
employment.
 The Court cannot presume that every failed student may hit a
jackpot like Steve Jobs of Apple Inc. Out of hundreds of
students who perform poorly, one may turn out to be
successful in life. His success story may be a source of
inspiration for many, but not for the bank to gamble with public
money.

9. Judgement:
 The prescription of a minimum percentage of mark for
students admitted under the management quota is to ensure
that the student has employment potential.
 If the student has employment potential, the loan may not
become a non-performing asset. But a student, who is not
meritorious, may himself turned out to be a non-performing
asset both to his parents and to the Bank.
 Therefore, no direction can be issued to the Bank to grant
loan to the petitioner in violation of the policy framed by the
IBA to fix cut off marks as 60%, for those who secured
admission under the management quota, to be eligible for the
grant of educational loan.
 Hence, this writ petition is dismissed.