Prior payment of interest does not bar eligible borrowers from claiming government interest subsidy.

The petitioner, an economically weaker student, obtained an educational loan from the Bank of Baroda for pursuing a two-year M.B.A. course at ICFAI, Bengaluru, for the 2008–2010 session. The loan was sanctioned before 31 March 2009, and she claimed eligibility under the Central Government Scheme for interest subsidy on educational loans for the relevant period up to 31 December 2013.

Although the petitioner had repaid the principal and the entire interest, she asserted that the benefit of the interest subsidy had not been extended to her and claimed refund or adjustment of ₹3,93,410 towards interest.

She relied upon the decision in C.W.J.C. No. 3847 of 2015 and analogous cases, affirmed in L.P.A. No. 1288 of 2017 and S.L.P. No. 2360 of 2018.

The respondents contended that her entitlement depended upon verification of compliance with the conditions of the scheme from the bank’s records.

1. Whether the petitioner was entitled to the benefit of the Central Government’s interest-subsidy scheme, considering that her educational loan was sanctioned before 31 March 2009 and that she claimed to belong to the economically weaker section.

2. Whether payment of the entire interest by the petitioner disentitled her from claiming the subsidy, or whether the eligible interest amount could be refunded or adjusted.

3. Whether the Bank of Baroda was required to examine and decide the petitioner’s claim in accordance with the scheme and the binding precedents cited by her.

The Court applied the Central Government Scheme for interest subsidy on educational loans, under which an eligible economically weaker student whose loan was sanctioned before 31 March 2009 could receive interest subsidy for the specified period up to 31 December 2013, subject to fulfillment of the scheme’s conditions.

The Court further relied on the principles stated in C.W.J.C. No. 3847 of 2015 and analogous cases, as affirmed in L.P.A. No. 1288 of 2017 and S.L.P. No. 2360 of 2018, concerning extension of the subsidy benefit to similarly situated educational-loan borrowers.

The Court held that prior payment of interest does not, by itself, bar an otherwise eligible borrower from receiving the subsidy; the amount may be refunded or adjusted in accordance with law.

The Court found no dispute that the petitioner had taken an educational loan before 31 March 2009 for professional education and claimed eligibility as an economically weaker student.

Since entitlement depended on compliance with the conditions of the Central Government Scheme, the Bank was directed to verify the petitioner’s records rather than reject the claim merely because the interest had already been paid.

Applying the scheme and the cited precedents, the Court reasoned that, if the petitioner satisfied the eligibility requirements, the subsidy had to be extended and the corresponding interest amount refunded or adjusted.

If found eligible, the petitioner was to receive the interest-subsidy benefit, with the relevant amount of interest refunded or adjusted.

The Bank was directed to complete the exercise within eight weeks from receipt or production of a copy of the order.