A senior public sector bank official said a cautious approach is taken at the branches’ end while sanctioning education loans due to high NPAs.
This has resulted in some genuine cases being overlooked and delayed, the official said.
Recently, the finance ministry had convened a meeting of public sector banks to take stock of the education loan portfolio and cut down on delays. Ministry calls upon banks to spread awareness about Central Sector Interest Subsidy Scheme between field structures.
Sharp rise in non-performing assets (NPAs) in education loans given by commercial banks India There has been concern in recent years, as it may hinder the growth of bank credit for higher education in the country, as published by an occasional paper. reserve Bank of India,
In India, about 90 percent of education loans are disbursed by public sector banks. Private sector banks and regional rural banks (RRBs) account for about 7 per cent and 3 per cent of the total outstanding education loans, respectively, as of the end of March 2020, said the paper published in June 2022.
Outstanding education loans of all banks stood at Rs 79,056 crore at the end of March 2020 and Rs 78,823 crore as of March 2021, as per the report by RBI on Trend and Progress of Banking in India in 2020-21. However, the outstanding loan increased to Rs 82,723 crore as on March 25, 2022.
According to Resurgent India Managing Director, Jyoti Prakash GadiyaNew job creation has not kept pace with the number of graduates exiting colleges, adversely affecting timely repayment of education loans.
As a result, NPAs have risen and banks are hesitant to give new education advances, especially loans up to Rs 7.50 lakh that are without any collateral and third party guarantees, he said.
Effective implementation of the new education policy, which lays due emphasis on basic skill development and employability, will create a win-win situation for all stakeholders, he said.
Most of the banks offer a scheme for education loan as per Indian Banks Association (IBA)DifferentIdeal education loan scheme for students pursuing higher studies in India and abroad.
As per this model loan scheme, education loan up to Rs 4 lakh does not require any collateral by the borrower, education loan up to Rs 7.5 lakh can be availed with collateral in the form of suitable third-party guarantee. Whereas, education loans above Rs 7.5 lakh require solid collateral. In all the above cases co-obligation of the parents is necessary.
The second category of education loan is sanctioned to those students who get admission in colleges/universities through management quota, provided they fulfill the minimum marks criterion in the previous examination.
The third category of education loan includes schemes for needy students to pursue vocational education courses conducted by training partners affiliated to Industrial Training Institutes (ITIs), Polytechnics, etc. National Skill Development Corporation (NSDC)/Sector Skill Council, State Skill Mission/Corporation, preferably leading to certificate/diploma/degree issued by such organization as per National Skill Qualification Framework (NSQF) and any other institution recognized by Central or State Education Board or university.
The fourth category of the scheme specifically caters to the need of students studying in premier institutes like IITs/IIMs/NITs/IISc or courses abroad which demand higher amount of loan amount. All education loans up to Rs 10 lakh (increased to Rs 20 lakh in September 2020) have been included in the definition of priority sector. reserve Bank of India,
Under most of these schemes, the moratorium period covers the course duration plus six months to one year, and there is zero/negligible processing fee for schemes with high value education loans.
The interest rate under various schemes carries a markup of 2-3 per cent above the Marginal Cost of Funds Based Lending Rate (MCLR)/ external benchmark depending upon the reputation of the course/institutions. The repayment period is in the range of 10-15 years.