Higher education loans get momentum in admission season
Higher Education

Higher education loans get momentum in admission season

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The education loan portfolio this season shows a gained a momentum and is expected to grow multi-fold. Keeping in mind the admission season in colleges, banks are gearing up to facilitate maximum education loans to students. Education loans have increased to Rs43, 801 crore in the year to February 2011, from Rs36, 522 crore in the previous corresponding period, which is a significant growth of 19.93%, says the latest report of the Reserve Bank of India (RBI). According to a senior official of the Punjab National Bank (PNB), “Our education loan disbursal has been showing significant growth. As of 31 December 2010, we disbursed around Rs2,750 crore towards education from our Rs21,700 crore retail loan portfolio. Going ahead we are optimistic about the growth of this sector.” He added, “Last year we posted a growth of 46% in our education loan portfolio; the current growth is 24%. Though, our volumes are increasing.” Efforts by banks to create awareness and promote education loans are evident. “The sector has grown at 30%-40%. Large numbers of students going for higher education are approaching banks for loans to fund their studies,” said K Unnikrishnan, deputy chief executive, Indian Banks' Association. However, post the global recession of 2008, the education loan portfolio which has the lowest default rate has witnessed increasing cases of defaults. But banks are not too worried as the non-performing loans have come back to earlier levels. Vivek Mhatre, general manager, retail, at Union Bank of India, told Moneylife, “Our NPAs on the education loan portfolio are minimal. Since 2008-09, our portfolio has doubled to Rs1,600 crore and we want to increase it by 30-40%. When a student opts for higher education from a premier institute like Indian Business School or IIM, the default risk is almost zero as these institutes have good placement facilities. Now the season of education loans has begun and we are already receiving a steady stream of proposals.” Mr Mhatre explained that “as per RBI guidelines there is no collateral required for loans up to Rs4 lakh, so this category has some default rate, but we have a monitoring mechanism in place and there is nothing to worry about.” Currently, as per RBI guidelines, banks can provide a maximum loan of Rs10 lakh for studies in India and Rs20 lakh for studies abroad.

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