Education loan growth in public sector banks dips

The education loan growth rate in public sector banks (PSBs) is witnessing a continuous declining trend.

While the number of education loan accounts are increasing, the year-on-year growth rate has been showing a declining trend both in number of accounts as well as in the amount. The total outstanding education loans of PSBs as on March 31, 2011, stood at Rs 43,074 crore in 2,235,532 accounts. The education loan amount was Rs 4,550 crore in 319,337 accounts as on March 31, 2004.

The growth rate in the education loan amount went up by 47.54 per cent and 49.14 per cent in 2005 and 2006, respectively. However, it has seen a continuous decline after that. The growth rate of education loan outstanding amount as on March 31, 2011, went down to 20.90 per cent.
 

READY RECKONER
As on March 31st			Year-on-year  growth (%)

 No. of
accountsAmount
outstandingNo. of 
accountsAmount 2004319,3374,550-- 2005468,2076,71346.6247.54 2006679,94510,01245.2249.14 2007944,39714,28338.8942.65 20081,246,87019,81732.0338.75 20091,603,38527,64628.5939.51 20101,928,35035,62820.2628.87 20112,235,53243,07415.9320.9 Source: IBA (PSBs)

Similarly, the growth rate in number of accounts has also fallen from 46.62 per cent at the end of March 2005 to 15.93 per cent at the end of March 2011. The issue will be discussed at the meeting of Finance Minister Pranab Mukherjee with public sector bank chiefs on Friday.

Secretary, financial services has already held discussions on the matter with the bank heads in April. The Indian Banks’ Association (IBA) has reviewed the current model education loan scheme and has proposed modifications in the scheme.

A senior finance ministry official told Business Standard the proposed modifications were being discussed with IBA and revision in the scheme was likely to be finalised shortly.

At present, the model education loan scheme allows loan up to Rs 10 lakh for students in India and up to Rs 20 lakh for the students studying abroad.

For a loan up to Rs 4 lakh, co-obligation of parents is required and for loans above Rs 4 lakh and up to Rs 7.5 lakh, co-obligation of parents together with collateral security in the form of suitable third party guarantee is required.

In case of loans above Rs 7.5 lakh, co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of instalments is necessary.

The rate of interest for loans up to Rs 4 lakh is BPLR and for loans above Rs 4 lakh, one per cent more than BPLR is charged by the banks.