Hyderabad family wins case against bank over edu loan insurance

Hyderabad: The Telangana State Consumer Disputes Redressal Commission has ruled that petitioners cannot be held liable for loan repayment when the Union Bank of India failed to specify the insurance duration under an education loan clearly.

The Commission held that it was improper for the bank to pressure the deceased student’s parents to repay the loan.

The Commission upheld an earlier order of the District Consumer Commission that directed the bank to cancel the education loan and return all pledged documents to the borrowers without collecting any charges.

Case background

According to case details, N Venkatanarayana Swamy and his wife Raghavani from Hyderabad had obtained a loan of Rs 10 lakh from Union Bank of India for their son’s education.

They utilised Rs 7.5 lakh of the amount and had repaid Rs 1.8 lakh between 2011 and 2016. However, after their son’s death, the parents stopped repayment. The bank later claimed that the student’s insurance coverage had expired after three years and demanded that the co-applicant parents repay the balance.

Challenging the bank’s demand, the parents approached the District Consumer Commission, which ruled in their favour. The bank appealed the decision before the State Commission.

Bank failed to clarify that policy covered merely 3 years: Bench

After reviewing the matter, a bench comprising incharge president Meena Ramanathan and Member VV Sheshu Babu found that the bank had only instructed borrowers to obtain insurance but failed to clarify that the policy covered merely three years.

It noted that education loan insurance policies generally remain valid for the entire loan tenure, and the bank had shown no proof that the borrowers were informed of the limited policy period.

The State Commission dismissed the bank’s appeal and reinforced the district body’s directive to waive the loan and refrain from taking any action against the parents.