File photo of State Bank of India ATM
A humiliation to many poor young graduates who had obtained educational loan from the State Bank of India's branch at Tamil Nadu's Bodinayakanur in Theni district: a few days ago the branch displayed photographs of defaulting students and their parents.
The bank believes that shaming the defaulters would pressure families to repay the outstanding educational loan, ranging from Rs 40,000 to Rs 5 lakh.
Outraged, students in the area protested against the bank.
One of them, who preferred to remain anonymous, said, "This is a shame. In rural areas, none would marry us. We are poor people, now ashamed."
Activists say this is violation of human rights.
Mr Henry Tiphagne, Executive Director of People's Watch told NDTV, "Would they ever be willing to portray the photograph of Mr Vijay Mallya for all the payments he has not paid back banks for years? This is a loss of dignity and human rights for the poor people. They should resort to legal recourse even in the worst case."
For the poor parents of the first-generation students, interest on educational loan is a huge burden. Many even opt to defer interest payment till their children secure jobs. But thanks to recession and job cuts, even after higher education, many remain unemployed or draw poor salaries.
They are unable to repay the loan amount and the accumulated interest. Owing to the poor quality of education in rural areas, many are not just employable as well.
Dr TR Balakrishnan, Educationist, suggests waiver of interest for those who can't afford.
He says, "Like they do for farmers, the government could consider extending time and waiving off interests. If they are capable they have to pay back the principal. But banks should adopt legal measures to recover."
State Bank of India has ordered removal of the controversial display following public protest.
However, officials argue they only followed the rule book. The Reserve Bank of India says it's working on a solution to the problem.
Dr KC Chakrabarty, Deputy Governor, explains, "One thing we are advocating is an insurance scheme for the educational loan. This is pending with the government. I think they need to do something, for people who have not been able to pay. Then banks will be more pro-active."
Educational loan scheme is just over a decade old in India. With the economy not so strong, the system is facing challenges in recovery.
It is time for a more humane and sensitive approach. Many warn a tough stance of this kind could backfire as rural youth and their families may get scared and stop pursuing their higher education dream.