“We are looking into it… whether a separate framework is needed or can it be incorporated in the existing structure,” an official familiar with the developments said.
Under CGFSEL, in default education loan is covered if loan There is a limit of ₹7.5 lakh without any collateral security and third party guarantee. Presently, the fund offers guarantee cover against default in education loans sanctioned by public, private and foreign banks.
This comes in the backdrop of a series of policy measures by the government to further strengthen sectoral lenders.
In a meeting on August 25, the government had reviewed the growth and disbursement status of education loans by state-run lenders. “Banks were asked to look into delays in the approval and disbursement process and fast-track the processes,” the official quoted above said.
Public Sector Banks (PSBs) have achieved around 19% of the education loan target of ₹20,450 crore for FY23 till June this year. “The inclusion of RRBs under the credit guarantee fund will increase education loans,” the official quoted above said. As per the latest report available, the sanctioned amount under the guarantee cover was ₹19,175 crore in FY21.
Banks have attributed the slow growth in education loans to rising non-performing assets in this category. Another official aware of the developments said, “The guarantee cover will help RRBs disburse more loans.”
As of July this year, around 7.82% of the total outstanding education loans are classified as non-performing. “RRBs can fill the gap areas, the government has already taken measures to strengthen them,” he said.
Last week, Finance Minister Nirmala Sitharaman had said that RRBs need a lot of support in digitization and sponsor banks need to pay more attention to them. A working group has been constituted to look into the operational and governance reforms including technology related concerns and a long-term action plan layout.