Thiruvananthapuram: Only three banks-- SBI, Canara Bank and Federal Bank-- have expressed willingness to provide bank guarantee to medical students for giving loans for their education. The government is making efforts to bring other banks also on board through discussions. Sources said that though the banks had expressed fears whether the government could stand guarantee to individuals as per the present laws and wanted an amendment for the same, the government convinced them to issue guarantee without amendment.
Instead, the banks agreed to provide guarantee on the basis of the government order during the meeting with Chief Secretary K. M. Abraham. The government agreed to give in writing that it would stand security or protection against a loss or other financial burden by invoking the Indemnity section. Section 124 of the Indian Contract Act, 1872, has defined ‘contract of indemnity.’ A contract by which one party promises to save the other from loss caused to him by the conduct of the promise or himself, or by the conduct of any other person, is called a ‘contract of indemnity.’
As per the government order, in case the bank is unable to recover the amount within a period of six months from the date of default, the bank will invoke the government guarantee, whereupon the government shall pay the amount within one month of invoking such guarantee. The bank may at its discretion sanction a bridge loan to the principal debtors, with tenure of six months for any needy student having short term difficulty in mobilising the devolved amount. The devolved liability shall be debited to such bridge loan and recovered in six monthly instalments. In such cases, the bank shall obtain necessary documents as applicable to the above facility, along with guarantee documents. If such a bridge loan is sanctioned to the student, the government guarantee shall cover the bridge loan also and the recovery procedure detailed above in the guarantee condition shall apply mutatis mutandis in this case also, the order said.
