Last month, J Padmapriya, a Coimbatore-based widow and mother of two, received a letter from Reliance Asset Reconstruction Company that had her reeling in shock.

The letter stated coldly that her son Radhakrishnan was in default on the ₹90,000 education loan he had taken from SBI in 2012 (for which she was guarantor), and that SBI had assigned all rights on the loan, which had been declared an NPA, to Reliance ARC. It directed Radhakrishnan to settle the outstanding amount of ₹1.22 lakh (including accrued interest) at one go, within 15 days.

Padmapriya acknowledges she and her son are in default, but says she was unable to repay the loan: her son was jobless for a year after completion of the course, by which time the moratorium on repayment expired, and interest began to accrue. She earns ₹6,000 a month and, struggling to survive, she fell behind on the EMI of ₹3,315. And, now, to be asked to pay ₹1.22 lakh in full is way beyond her capability, she laments.

Indigent borrowers

Nor is Padmapriya alone in her predicament. Other defaulters on education loans from SBI, many of whom are in indigent circumstances, are in a similar fix, with Reliance ARC hustling them to repay their outstandings within 15 days.

Nirmala (name changed on request), 23, whose mother works as a domestic helper, availed of a ₹2 lakh education loan in 2006, but secured a job placement only in 2011. By then, her loan outstanding had more than doubled, and although she has since made part-repayments, she still owed SBI ₹1.2 lakh last November, when she received a letter from Reliance ARC that claimed, shockingly, that she owed it ₹2.25 lakh.

A tearful Nirmala says that Reliance ARC is now “putting pressure” on her mother to settle immediately.

Foootnotes to a deal

Pitiful though their plight is, Padmapriya and Nirmala (and many others) are mere footnotes to larger, emotionless corporate deals that have touched their lives. In three tranches spread over 2015-16, SBI sold to Reliance ARC some 43,000 Education Term Loans (ETLs), corresponding to a total loan of ₹848 crore.

The bank’s ETL portfolio shrunk by ₹287 crore to ₹15,177 crore in FY 2016.

An SBI officer, who did not wish to be named, said the bank no longer had ownership of the ETL accounts, and so when the borrowers approached the branches, they were directed to Reliance ARC.

A communication from the SBI Corporate Office states: “While branches can accept the repayment and credit the amount into the Trust account of Reliance ARC, borrowers will have to obtain loan closure certificate from Reliance ARC only.”

Padmapriya says that when she sought an appointment with Reliance ARC staff, she was fobbed off. “When I explained that it would be impossible to settle the entire amount at once, he said, ‘we do not accept payment in monthly instalment. That is our policy’,” she recalls.

Financial illiteracy

A lack of understanding of how the education loan repayment schedule is structured has compounded the borrowers’ problems. Nirmala says she was unaware that she had to make a token remittance every month beyond the moratorium period so as not to be in default.

In other cases, SBI appears to have unfairly shifted the goalposts. “While the scheme provides for a 10-year repayment period for loans up to ₹10 lakh, SBI had fixed it at five years,” noted a banker, seeking anonymity.

Right now, a clutch of defaulters, caught between an SBI that has washed its hands of them and a stern-sounding Reliance ARC, is running around seeking help from any quarter. They are not sure which regulator or consumer court can help them.

And since even the overall mood has turned against defaulters of bank loans, even sympathy is in short supply for those in this predicament.