Twitter
Advertisement

80% students don’t earn enough to repay loans

As many as eight out of ten students taking an education loan are defaulting on loan payments as a grim job scenario cripples their ability to repay. Defaults have risen to 70-80% this year from 25-30% in the last, say banks.

Latest News
article-main
FacebookTwitterWhatsappLinkedin

As many as eight out of ten students taking an education loan are defaulting on loan payments as a grim job scenario cripples their ability to repay. Defaults have risen to 70-80% this year from 25-30% in the last, say banks. “There are more defaulters for education loans compared with earlier years. Also, repayments of education loans that were availed 2-3 years back are accumulating at banks,” said a senior official from a public sector bank.

According to the Reserve Bank of India data, total outstanding eduction loans stood at Rs54,300 crore as on November 30, 2012.

“Those who borrowed for management and nursing courses are defaulting more,” said D Sampath, additional manager and head, Retail, Federal Bank.

Students going to private universities paid higher fees compared with government institutions, which, bankers cite, is a major reason for defaults. Also, there is a huge mismatch in the borrowed amount and income earned by the students. “People's capacity to service bigger loans is less these days as they do not get the expected income due to the slump in the job market,” said Satish Mehta, a credit expert and founder director at credexpert.com.

For those who are not wilful defaulters, banks such as Central Bank of India are trying to help find solutions.

It is recruiting candidates from among defaulters as business facilitators so as to enable them to repay the money over a period of time. “We have just initiated this project and it would be a better and productive solution to bring down delinquencies,” said Ram Sangapure, general manager- retail, Central Bank of India. Indian Bank, Indian Overseas Bank are planning to follow suit.

Going ahead, bankers said they are turning cautious on educational loans and are asking for credit guarantees, even as the government is pushing for relaxation of norms for such loans.

The government wants banks to lend for management quota students irrespective of their academic background. The loan norms are yet be finalised.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement