State govt. formulated guidelines for the loan subsidy given to students

The Karnataka government has formulated the guidelines for the nodal agency of education, director of technical education, on the 6% loan subsidy for students of professional colleges.

After this guideline banks will be able to sanction the loan to any student who get admitted to professional courses through the state CET conducted by Karnataka Examination Authority (KEA); each bank (SBM, SBI, Canara etc) will have to classify one particular branch for further repayments. Moreover, banks who will receive the applications will have to send applications with proper recommendations; students will be able to avail the loan from any of the nationalized banks; the sanctioned loan amount will depend on certificate given by respective college principals regarding the fees for the entire course. This amount has been fixed to Rs 5 lakh including tuition fee. Student will have to pay upper limit of 6% interest. Nowadays it's a clever decision to take education loan for giving heights to your career.

About the proposals of repayment of subsidy, the banks are required to confirm that student has passed the earlier semester and are eligible to continue the course. The banks must send only such proposals. The proposal has to be collected from every bank and send it to the nodal agency through representative branch. Banks will be get the subsidy through a single cheque and in case a student fail in any subject and if they are not eligible to appear for the next semester, then they will not receive subsidy for the entire course. Subsidy limit has been set up till the course period only.

Bankruptcy or Debt consolidation: which is better to opt for?

If you are in debts that are becoming hard to repay, you must be thinking of debt relief options. For a debtor with outstanding amounts, it is essential to decide correctly which option to select - bankruptcy or debt consolidation. To decide on “which is better bankruptcy or debt consolidation?” one needs to understand what are debt consolidation and bankruptcy all about.

Debt consolidation is a debt repayment option where you take the help of a debt consolidation firm. This debt consolidation firm negotiates with your creditors on your behalf to reduce the interest rate. You will need to pay an amount for all your debts to the debt consolidation firm who will pay to the individual creditors on your behalf. Choosing a debt consolidation program can affect your credit both ways. Some lenders can consider the fall in credit score as a “negative mark” whereas others can appreciate your willingness to repay, even if through reduced interest rates.

Bankruptcy, on the other hand is a declaration of your inability to repay. It is a better option for those who are neck deep in debts. You can file for chapter 7 or 13 accordingly. In chapter 7, your assets are liquidated to pay off the debts. Chapter 13 allows you to repay your debts through a payment scheme under the protection of the court. A repayment plan prepared by the debtor is approved by the creditor and a court trustee. However, the debtor’s credit gets affected if he files Chapter 7 bankruptcy and not Chapter 13.

It is always better to try out ways of repaying your debts, either by a self repayment plan or through debt consolidation program. When you choose a consolidation program, it does have a positive affect on your credit score in the long run. Therefore, when you think about “which is better bankruptcy or debt consolidation?”, consider the credit affects of each process as well as analyze your financial situation. Depending upon how much you can pay and how your credit will be affected, you can choose to file bankruptcy or enroll for debt consolidation program. If required, you can also take the help of professionals who will guide you to make the right choice.

Low-interest loans availed by 300 women of SHGs

President Prtibha Patil had launched in the city a scheme bringing down the interest rate to four per cent, after the launch of the scheme around 300 women from self-help groups (SHGs) have taken loans up to Rs 10 lakh from nationalized banks in the district since October 10.

Till now twenty-five SHGs have been able to get the loan sanctioned while 15 are in the final stages of approval. Loan seekers have submitted applications for poultry, organic, goat and dairy farming.

Senior district coordinator T L Shere of Mahila Arthik Vikas Mahamandal (MAVIM) is one of the key agencies coordinating the scheme in the district said, “The scheme will enable women to take on more entrepreneurial activities and repay faster”.

He said Bank of Maharashtra, Bank of India, Central Bank, State Bank of India have offered loans ranging from Rs 50,000 to Rs 1 lakh.

The scheme has received such a good response while awareness is still very low. Pune District Collector Chandrakant Dalvi told that he will be organizing a meeting with bank representatives, followed by meetings in every taluka.

Shere said so far banks are offering loans at 9-11 per cent, therefore nearly 17 lakh women from rural areas from a total of 1.42 SHGs have been benefited from the scheme.

He added, “Around 45,000 SHGs will stand to get Rs 50,000, another 72,000 will get Rs 1 lakh and 18,000 SHGs will get Rs 2 lakh, with the state taking on an interest subsidy of nearly Rs 129.01 crore in three years”.

On the other hand a senior officer with a nationalized bank said they are confident of repayment going by the past records of SHGs. He said, “We will be only too willing to help these women”. Manisha Kale of Pune’s Garib Nawaz Bachat Gat, was the one to get the first disbursal of Rs 2 lakh from the president, hence she used the money on planning for dairy farming. “It should start soon. We have mobilized our group,” she said.

Getting Education loans for foreign studies not to be easy for next academic session

Now it will be difficult for the aspiring students who might be planning for higher studies in abroad from the next academic session.

The multinational companies have started handing out pink slips almost every day and job prospects are also getting bleak in the West, and banks are also likely to tighten their education loan norms. Banks are also considering of lowering the limit for collateral requirement for destinations like the US & UK.

Adding to the worries the students will be going to find difficulty in getting education loan for second and third step universities in these countries. As per HDFC bank sources, it has already zeroed lending in aviation sector where it will be conventional in its lending approach to students.

A senior banker, who refused to be identified, told that the step taken by the bank will be logical for the banking system, which is already facing chin music because of downslide in the equity markets. “It’s always better to prepare a disaster plan rather than wait for the disaster to strike, and then plan. Not only will the banks benefit, but students will also be saved from an uncertain future,” the banker said.

Sujan Sinha, senior vice-president, retail assets, Axis Bank agreed with this. According to him lot will depend on the existing macroeconomic environment globally when the new education season will begin next year. “Though it’s a bit premature to comment, but considering the uncertainty surrounding the Western economies, the possibility of banks getting stringent about education loans can’t be ruled out,” he said.

Sources in HDFC Bank conveyed that they are already taking precautions, in terms of lending. "There are always some sectors which are riskier than others. In the last few months, aviation has been identified to be one such sector, and hence we were cautious while disbursing educational loans in this sector," the bank official said.

While academicians are of the view that a majority of students have plans for traveling abroad for master courses and foreign degrees. In foreign the courses offered are usually of 12-18 month duration. This is further going to add to the agony of the students as the job market is improbable to stabilize in the near future.

Even Anindya Sen, professor at the IIM, Kolkata, doesn’t rule out a possible dip in the numbers. "Those students going to lesser known universities will find it difficult to fund their education, as the banks are likely to be extra careful while sanctioning education loans," he said.

Another end result will be a major shift from the financial sector to other areas of study. "Looking at the job market, we will also see a sect oral shift over the next couple of years. Not many students will go abroad for degrees in financial studies. There will also be a slight dip in the salary packages," he said.

Rupee is depreciating rapidly against the US dollar adding to the hardships of those weaving dollar dreams. Now the cost of the loan of $25,000 (around Rs 10 lakh) has increased to Rs 12.5 lakh as compared to six months before. However currently, in case of a loan amount exceeding Rs 4 lakh majority of the banks ask for collateral. The collateral can be in the shape of property, FDs, NSCs, life insurance policy or any other instrument, which the banks find appropriate.

A Syndicate Bank official also points towards the rise in defaults. "If we are faced with such a problem, we have leverage and we may package the loan differently and offer the opportunity of postponing certain payments or making balloon payments in later part of the loan. But they will have to repay the loan within the specified time period. It will also depend on how genuine the case is."

Education loan portfolio on increase in Kerala banks

By the year end, June 30, 2008 banks in Kerala have reported a huge increase in the number and amount of education loans sanctioned.

As per the figures released at the two-day State Level Bankers Committee meeting which ended on Tuesday, 12,958 education loans to the tune of Rs.4.95 billion ($110 million) were sanctioned during the period under review, which is up from 4,132 loans worth Rs.983.4 million for the year ended June 30, 2007.

While the banks distributed 20,085 loans to tune of Rs.2.64 billion last year as compared to 5,383 loans worth Rs.573 million in the previous year.

According to the report 75 percent of the total applications for education loans came from Kottayam, Thiruvananthapuram and Ernakulam districts, and loans were taken for pursuing nursing courses in Karnataka and Andhra Pradesh.

The education loans have been categorized into two slabs. Loans up to Rs.400,000 do not require any collateral security and the interest rate is 13 percent for studies within the country and 13.5 percent for studies abroad.

Whereas loans above Rs.400,000 require collateral security and have an interest rate of 13.5 percent for studies within the country and 14 percent for studies abroad.

When bank approves the loan, the fees are directly sent to the institution as required by them.

The repayment of the principal amount starts after one year of completion of the course or six months after getting a job, whichever is earlier.

Kerala-based State Bank of Travancore (SBT), which distributed 3,673 loans valued at Rs.800 million, had lead from the front. By the year ended June 2007, the bank has distributed 1,636 loans worth Rs.148.8 million.

NSCB to launch new scheme ‘Education Loan’

The Nagaland State Cooperative Bank Ltd (NSCB) will soon be launching anew scheme called education loan. Speaking at the sensitization program on banking at Baptist High B.K. Thadani, Managing Director, NSCB Ltd said, “We are going to introduce education loan soon”. Thadani informed that NSCB offers service to credit the needs of primary agriculture cooperative societies in the state.

“The Bank has been playing pivotal role for the socio-economic development of the people in our state for poverty elevation,” he said. Bank has been offering services from the last 41 year; the NSCB has offered great help to the rural people particularly to the farmers. In addition, the bank has been carrying out all possible activities to create awareness by developing the habit of thrifts amongst the rural people and extending banking facilities through its branch network spread all over the state.

Times New Roman;font-size:100%;">He also told that the extent of reaching of financial services to the population of the state was very bleak; he added that only 21 percent of the total population has a bank account while the vast majority of 79 per cent population does not have bank account.

“There is tremendous scope for financial coverage if we are to improve the standard of life of the deprived classes of the people,” he said. He also stated that bank has taken possible steps so that persons belonging to low income groups both in urban and rural areas do not face difficulties in opening bank accounts due to procedural hassle, therefore the KYV procedure for opening accounts has been simplified for those persons with balance not exceeding Rs. 50,000 and credit in the accounts not exceeding Rs. 100,000 in a year.

“This (NSCB) is the only bank catering the need of rural masses,” he said. He added to encourage the students to know the value of banking, provisions have been made for the students to open their bank account and get the benefit. Also speaking on the occasion, Kekhwengulo Leah, Board of Director, NSCB Ltd, Phek district affirmed that the bank has been providing best services to rural people as well as financing the youngsters in self-employment related activities.

"If you want to become a successful person, you must know how to manage and how to save the available resources,” he told the students. Presiding over the function, Rajuselie Lhousa, Board of Director, NSCB said the main aim of the program is to make the students aware about the function of the bank and variant facilities being made available to the people.

Earlier, Isaac John, vice principal, Baptist High said chanting prayer while Medophrenuo and Vilalie Zaputuo-u presented special number. The function concluded with vote of thanks proposed by Pankaj Bhattacharjee, Branch Manager, Kohima (Main Branch)

J&K Bank gives more concessions in educational loan to its state students

In J&K state the education sector is lacking behind in state affairs. The literacy rate is very disappointing; according to figures it is the third lowest with 55.52%, after Bihar and Jaharkhand as against all India rates of 65%. Even though in state the educational facilities have expanded considerably but the literacy rate has failed to keep up with the pace with the passing time.

In fact the gender wise also the gap in literacy continues as high as 23.6%. Precisely, there are lots of evident deficiencies, which have contributed a lot to the mess in the state’s education sector.

In the midst of this scenario, there is one more fact that there has been a considerable improvement in indicators like enrolment ratio, reduction in drop out rate retention etc. But for most of the parents it is very difficult to impart higher education to their children due to increasing cost of education. Even though there is educational loan scheme to meet the financial requirements to help students to pursue higher education but the ceiling in the scale of finance has broken the dreams of students.

However a traditional educational loan scheme with almost uniform features is available with all the banks. But, J&K Bank has move forward by taking up certain initiatives to improve upon the educational loan scheme, which was introduced in 1998, so that students in the state don’t suffer because of unavailability of finances to pursue higher education. Not only the ticket size of the loan scheme has been improved, new courses have been added over the years and all these have been brought under the ambit of the scheme. More provisions have been added to give relaxations to the students while obtaining loan under the scheme.

The revised scheme has given a big relief to the student’s community, as the ceiling on the quantum of finance has been increased from Rs.7.50 Lacs to Rs.10 Lacs for studies in India whereas for studies abroad, the loan limit has been increased by Rs. 5 Lacs, from Rs.15 Lacs to Rs.20 Lacs.

Usually, after taking loan under the scheme, the borrowers have to repay the loan after completing the study. Though there is a repayment holiday of course period and one year or 6 months after getting job, whichever is earlier? After that, the loan has to be repaid in 5-7 years. Moreover it is mandatory for the borrower to pay the accrued interest monthly during the repayment holiday period.

But under the revised scheme, the borrower has an option. The accrued interest during the repayment holiday period will be added to the principal loan amount and will be loaded in the Equated Monthly Installments (EMI) fixed by the bank, which means, the borrower doesn’t have to make repayment during the study period. Yet, the borrower can earn a concession of one per cent in rate of interest, in case he decides to repay the accrued interest monthly during the study period.

Under the revised scheme the range of interest rate is 10.50% to 14.50% depending upon the quantum of loan. And during the repayment holiday, the borrower could be charged simple interest.

Further concessions have been introduced in the scheme for talented students pursuing courses in IIT, IIM, and Indian school of Business, Hyderabad will not have to give tangible collateral security for loans up to Rs.10.00 Lacs. As well, a concession of 0.50% in the rate of interest will be allowed for students pursuing their degrees from these institutes. While for others loans above Rs.7.50 Lacs will be given against the tangible collateral security of suitable value.

The regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping have also been included in the scheme. In addition, courses offered in India by reputed foreign universities, evening courses of approved institutes and computer certificate courses of reputed institutes accredited to Department of Electronics or institutes affiliated to university have also been taken under the ambit of the scheme. The scheme has also included provisions for employed persons who intend to improve their educational qualification and /or to receive training in modern technology in India or abroad, can also be assisted under the scheme given the education / training received by them offer prospects of their better employment.

Other expenses such as travel expenses/ passage money for studies abroad, insurance premium for student borrower and any other expense required to complete the course - like study tours, project work, thesis, etc, will also be covered by the loan. In the normal conditions, the bank while evaluating the loan will look into the future income prospects of the student. But, where required, the resources of parent or guardian could also be taken into account to evaluate re-payment capability.

In some of the foreign universities there is a requirement that the students need to submit a certificate from their bankers about the sponsors’ solvency/ financial capability, with a view to ensure that the sponsors of the students going abroad for higher studies are capable of meeting the expenses till completion of studies. Banks can issue such capability certificates after the applicant submits financial and other supporting documents to ascertain the capability / solvency. The banks will dispose the loan applications within a period of one month.

For primary education, the Bank has designed a loan scheme - Budshah Primary Education Loan scheme. The scheme has been designed to provide a financial cushion for parents so that then can provide even Pre- Primary schooling to their children studying in nursery, lower kindergarten and upper kindergarten. In addition, scheme will also cater to the needs of students pursuing B Ed and M Ed courses.

ICICI Bank slow in increasing education loan segment

The government has been asking the public sector banks to sanction more and more education loans, but ICICI Bank, the country’s largest private sector lender, has slowed down the portfolio under the segment.

At the 14th AGM held at Vadpdara last month, K V Kamath, chief executive officer of ICICI Bank, informed the bank is ‘hesitant’ to get into increasing quantum of education loans because it is difficult to handle it in the context of collection.

The education loan portfolio requires a minute of AGM posted on the Bombay Stock Exchange last week.

He had said it is part of the overall strategy and bank sees more opportunities in corporate business vis-à-vis retail. “The growth in the retail business has been impacted by higher levels of interest rates and property prices in cases of mortgage loans,” Kamath added. Moreover at present, the interest rate on education loans is about 12%.

Earlier during the month, finance minister P Chidambaram had informed that in the world India was the only country where education loan was given on such a large scale, to about 14 lakh students. He added about Rs 20,000 crore was disbursed as education loans last year.

According to the figures as on March 31, 2008, the total outstanding of education loans stood at Rs 20,547 crore against Rs 15,209 crore as on March 2007, there has been a growth of 35%. In future the portfolio of education loan will grow high as education cost in the country is increasing.

As per the reports of the survey conducted by an industry chamber, since 2000 school expenses for a single child, excluding tuition fees, have gone up from Rs 25,000 to Rs 65,000 per annum.

School costs have also gone up more than double the rate of present inflation level, which stands out to be at a 13-year high of over 12%, prompting parents to do timely planning for their child’s education.

The government has been taking many steps so that wide section of students can avail education loans.

One of the major hurdles faced by students to get education loan, especially the students with financially weaker background, is the collateral and co-applicant clause attached with education loans in the country.

If the loan amount exceeds Rs 4 lakh, most of the banks ask for collateral, such as property, fixed deposits or any other instrument that is found suitable.

Madras HC directed bank to disburse education loan to the student

Madras High Court directed a bank to give loan to an engineering college student in a week’s time after the applicant took back the complaint against bank officials.

Disposing an appeal, Justice K Venkatraman noted the evidence of the bank made through its lawyer and ordered it to sanction the education loan.

In his petition, R Premkumar of Kollamcode in Kanniyakumari District, a diploma-holder in mechanical engineering, said he had taken admission in the II-year BE course in the Dr Sivanthi Aditanar College of Engineering, Tiruchendur, during 2007-2008.

He had applied for a loan in the Kollamcode Branch of the State Bank of Travancore, under the Gyan Jyothi Education Loan Scheme. His father had an account in the bank branch for 20 years.

But, the manager had kept delaying the matter without any valid reason. He and his father met the official several times, but the officer did not get a proper reply for the delay.

Therefore he had to borrow Rs 40,000 from a private lender to pay his fees.

He filed a complaint against the manager with the bank Head Office at Thiruvananthapuram.

The head office forwarded the complaint to the Deputy General Manager, Zonal Office, Chennai.

Premkumar brought the matter into the notice of the Banking Ombudsman Manger, Chennai, but there also the matter was treated as closed without an enquiry.

He appealed the court to order the bank for sanctioning the loan for the academic years 2008-09 and 2009-10 so that he can complete his course.

When the matter was put before the Justice K Venkataraman, counsel for the bank, in its defense submitted an application that in view of the petitioner complaints against the bank officials, the amount could not be given.

If the petitioner withdraws his complaints, he said, there won’t be any problem in granting the loan. In turn the petitioner’s counsel agreed to the requirement.

Banks to spare both new and existing education loans from rate hikes

Now students can plan for higher studies as almost all commercial banks including State Bank of India (SBI) and Punjab National Bank (PNB), have not increased interest rates on education loan on the existing as well as new.

Banks have taken this decision on finance ministry advice not to touch the interest rates for priority sector lending, particularly education, agriculture and housing, up to Rs 30 lakh. Most of the private sector lenders do not give education loan and the market is dominated by public sector banks.

The finance ministry senior official told ET, “Almost all the public sector banks have agreed to our suggestion of not raising interest rates for most of the sectors coming under priority sector lending including education loans. This will apply to existing as well as new loans”.

The matter was taken up in finance minister’s meeting with the chief executives of public sector banks earlier this month. All the banks have taken a unanimous decision of not hiking the rates of education loans. “One or two banks were having some objections which is also likely to be shorted out soon,” the official said.

Recently, after RBI hiked the rates in July, banks including SBI, PNB, Allahabad Bank and Bank of Baroda have raised their prime lending rates by 75 to 100 basis points and subsequently revised interest rates on sector-specific loans. But all of them did not touch the education loan. Besides this some of the banks chose not to touch the existing and new auto loans also. In case of new home loans, interest rates for amount up to Rs 30 lakh have been left untouched as it comes under priority sector lending.

Govt to provide interest subsidy on educational loan for students of weaker section

In a conference of state ministers of higher education Human Resources Development Minister Arjun Singh said the government will be launching a scheme under which it will be providing subsidy on educational loans taken by economically weaker sections and also start a scholarship scheme to help poor and meritorious students so that they can take admission in professional courses.

The government will also start a national merit scholarship scheme under which about 41,000 boys and the same number of girls will be given scholarship based on their performance at the intermediate examination.

He said under the scheme each student will get Rs 1,000 per month for ten months for the first two years and Rs 2,000 monthly for the subsequent period. Under the scheme the top two per cent of the students of class XII will be covered.

The government has already another scholarship program running since 2006 for single girl children securing more than 60 per cent marks in class X and XII. Besides, the government has increased the M. Tech assistance from Rs 5,000 to Rs 8,000.

AB launched awareness program on educational loans

With the starting up of new session of the colleges Andhra Bank has launched its awareness program on educational loans. Bank on Wednesday started its program at Sri Venkateswara Government Polytechnic, the venue of Eamcet counseling.

At the launch of the program Andhra Bank Chief Manager YH Ramakrishna said the bank has introduced Pattabhi Vidya Jyothi Scheme with an aim to provide loans to students for pursuing higher education. A sum of Rs 1,000 crore was lent last year under the scheme.

Last year in Tirupati Zone comprising Chittoor, Nellore and Kadapa districts, the bank has issued loans to the tune of Rs 25 crore last year. For women students, the bank is charging 0.05 per cent interest rebate.

The students have to repay the loan amount one year after the completion of the course or six months after employment whichever is earlier. The awareness camp will be working till August 7. During the launch of the program senior manager Suresh and bank officer Ravikumar were also present.

Banks reluctant regarding disbursement of loans for aviation studies

In the recent times there has been a boom in the aviation industry because of which more and more students are taking up aviation courses. But banks classify aviation as career training and not professional education for the purpose of loan disbursement, so they have categorized these loans as personal loans and seek collateral accordingly.

Banks have been reluctant regarding disbursement of loans for aviation studies which in due course will be hampering the job prospects in the aviation sector. According to analysts this type of attitude of banks might affect the fortunes of aviation training institutes.

In India there are more than six branded aviation training institutes. As per industry experts, in the last six months 12 new institutes have started. Most of these institutes are offering one-year diplomas after higher secondary (+2), to train the candidates aged 17 to 24 years as cabin crew. The institutes charge fees anywhere, between Rs 1 lakh and 1.25 lakh per student.

There are some institutes who offer part-time courses. These jobs pay around Rs 16,000 a month. Approximately, over 70,000 students have been trained in the last two years alone.

Bank of Baroda executive said, "With a drastic change in the business environment, students who took loans for cabin crew (purser/air hostess) courses may not get jobs in the aviation sector. Instead, they may end up in the hospitality sector, which offers lower salaries compared to airline jobs. This has adverse implications on the repayment schedule. So we are going slowly on loans in this space."

Ananthakrishna, chief executive, Karnataka Bank stated, "There have been reports that a US-based airline training institute, which had many Indian students, had shut operations. The economic conditions (for aviation sector) have become uncertain and in such circumstances, banks have to be cautious in granting financial assistance for such courses."

The Reserve Bank of India has formulated prudential norms which makes it compulsory for banks to set aside a high risk weight age amount (125 points) for personal loans. Banks charge higher rates to cover the costs and risks.

Therefore the interest rates will be higher than prime lending rates (PLRs) currently which are ranging between 12-50 and 16.50 per cent. Hence the amount of loans for airline courses, especially pilot and other technical courses, is on the higher side.

According to the credit head of a private bank most of the students who take such loans come from financially well off families therefore they are capable to pay back the dues.

Education loan to get admission in your dream course

Recently most of the professional institutes have increased their course fees. Therefore for most of the students the professional courses are becoming out of reach. The only option for this is education loan. How to get education loan?

Most of the banks are offering education loan online and some of the banks have opened their counters on the university/college premises for distribution of loans. You can even walk to any bank branch with in your reach and fill the application form for loan.

Many of the public sector banks are offering education loans up to Rs20, 00,000, whereas, private sector banks are relatively smaller players on education loans. On the loan amount up to Rs4, 00,000 no collateral is needed but on the amount up to Rs7, 50,000 third party guarantees is enough. Then some additional security by a third party or parents is needed.

The tenure for the repayment of the amount is six months after completing the course, before which only simple interest is charged. Parents can avail tax benefits on this interest. The interest charged is between 10.50% and 11.50% for the loan and there is no penalty for foreclosure of the loan.

Education loan is given for equipment and hostel fees as well. The maximum limit for domestic loans is Rs 10, 00,000 and for international courses Rs20, 00,000. The loan has to be repaid back in a maximum of 5 to 7 years. Though most of the banks offer similar interest rates but before choosing the bank do the research of interest rates and make sure you’ve estimated correctly the expense of your course and any details the bank has relating to tenure and commencement of repayment of the loan.

Educational loan queries increase, route to course of choice

Board results declared students have started heading towards colleges and universities for admission so as the queries for educational loan from the banks have also gone up. According to bank sources in the past few months there has been increase in the demand for educational loans, some say by almost 50% over last year. Mostly the queries are coming from those students who are looking beyond Delhi University (DU), into the vast range of choices offered by other universities.

For instance Aditi Kalra (name changed), a class XII student from Delhi, who has scored 72% in her Board exams. Kalra wants to take admission in Economics (Honours) program in a good college, but have less hope of getting it because of her average marks. “And since the cut-offs go up every year, it's bound to be tougher to get admission in an A-list college this year,” says the Commerce student. Hence Kalra has already drawn up an alternate plan of applying to private institutes, where she hopes to get the program of her choice.

Like Kalra there are many more enquiring about loans Sandeep Puri, an official at the Oriental Bank of Commerce says, “The number of queries about educational loans has gone up by 50% from last year.” It is not only the OBC which is reporting an increase in number of applications and queries for loans even the Punjab and National bank (PNB) has already processed 879 applications in the month of April, 2008, disbursing Rs 21 crore as education loans. According to a senior official at the bank the figure is likely to go up further, especially with the admission season just taking off in most universities in the country.

According to Bank officials in the past few years the number is going up steadily. SBI, had distributed loan of Rs 113 crore last year in the Delhi region, says, “There has been an appreciable upwards movement in the number of loans being disbursed this year.”

According to SBI chief general manager (personal banking), Nanda Kumar, it would be too early to talk about figures, but by looking at the trend it is quite clear more students are opting to take the educational loan route to fulfill their dreams.

He adds, “Since the terms of loan are quite simple, students prefer to pay off a loan than put extra pressure on their parents.”

It is not difficult to find the reason behind the increase in the loan applications. The DU officials acknowledge the crisis for seats in the university has forced many students to opt for private institutes. There are only 43,000 seats available and over 1.5 lakh applicants, it's a tall order indeed

Says S K Vij, dean of students welfare, “Getting through into a college in Delhi University is getting progressively more difficult. In such a scenario, students will look at any option, even a private institute for a good course.”

Education loans need to be re-engineered

At the inaugural function of the fourth ASSOCHAM International Educational Fair the HRD Minister Arjun Singh told the reporters that the government was considering a proposal to provide counter-guarantee for students who apply for bank loans for higher education. But according to some news reports it seems the HRD Ministry is playing with the idea of being a guarantor for the educational loans provided by banks. It is being considered that there might be possibility of creating a fund to maintain the guarantee which could be used for meeting NPAs that might rise out of these loans.

The alleged reason for this is that individuals have to provide collateral for loans that are more than Rs 4 lakh and, therefore the government is stepping in a socialistic fashion.

Although the commercial banks are trying to increase the facilities for educational loans but, unfortunately, they do not have adequate resources to finance income-based lending activities compared to asset-based lending.

For instance, activities such as trade, hotels and restaurants get similar treatment from commercial banks as the model for them is security- or asset-based lending and not lending based on projected cash-flows, because estimating risk premiums in the latter is more complex.

In recent times most of the large commercial banks have increased their educational loan portfolio. The quantum and terms of loans vary from bank to bank. Currently, they lend a maximum of Rs 10 lakh for studying in India and up to Rs 20 lakh for studying abroad. The fees covers: tuition fees payable to college/school; examination /library /hostel charges; travel expenses; purchase of books /equipment /uniform; and cost of two-wheelers (optional).

Repayment of the loan is in the form of equated monthly installments (EMIs) and the repayment generally starts one year after the course or six months after the graduate has got a job. The tenure of the installment can be from three years to eight years. Most banks do not charge margin up to Rs 4 lakh and, beyond that, some 5-15 per cent margins are charged. Likewise, security is not required for loans up to Rs 4 lakh; above this, security is expected. The interest charged is that of Prime Lending Rate (PLR) or one percentage above the PLR.

To encourage banks to lend more to the poor and needy students the government has brought educational loans under the domain of priority sector.

However there is no separate data available on the quantum of non-performing assets in these educational loans. But seeing the reports of these banks of educational loans given in the 1980s, there is not much to write home about.

On seeing the case study reports it has been found that even students from prestigious engineering and management institutions have not repaid educational loans, though many of them are well-placed in jobs in India or abroad, some earning in millions. Tracking them is a very difficult task in these days of job and city/country hopping among executives. It is well known in India, often, the higher the social status of a person, the worse-off is his behavior relating to public assets and loans.

Political compulsions and other policy pressures will force banks to continue to lend and this may increase the burden with a large level of NPAs, especially with respect to such loans. The defaults may not be due to the borrower’s inability to pay, but rather his unwillingness.

The banks have to do hard work and formulate policies to meet the educational loan requirements of all these classes along with this minimize risk associated with increased NPA in this sector as the higher the income of the person, the less he seems willing to play by the rules.

It may be sensible to take up the whole issue afresh and create an appropriate support model and re-engineer the entire educational sector as done in the case of the housing sector. The Finance Ministry should also create an Educational Funding or Finance Corporation, on the lines of the housing finance corporations. This type of corporation can be formed by many leading financial institutions, with a amount of at least Rs 1,000 crore.

The Corporation should have the members who have knowledge related to educational institutions, courses, opportunities and job prospects. It must create a national register of educational institutions and the fees charged by them, including the facilities offered, and also compile a profile of current and past students.

The loan sanctioned to the student’s should be charged from the first salary, and it should be the responsibility of the employer to deduct the EMIs and remit them to the bank similar to the tax deducted at source..

The employment application should compulsory which should have a column to collect information regarding the loan status of the prospective employee.

The employer can be any body in the public or private sector, such as a company, co-operative, corporation or a partnership firm. The employee will be responsible to inform his employer about his loan position and it should be the responsibility of the employer to deduct the EMI from his pay and remit to the bank.

On the certificates issued by educational institutions should clearly indicate if the student is a loanee, as in the case of a hypothecated vehicle mentioned in the RC book. After repayment of the loan and discharge note to that effect, the educational institution can remove the stamp from his certificate.

Even every passport should be carry the stamp mentioning the loan status of the person and if he has availed of an educational loan then immigration clearance should be mandatory and given only on clearing the loan.

In the case of students don’t get jobs after availing of the loan, the Government can recruit them as outsourced temporary hands in the respective Departments / Ministries and deduct the EMIs from their monthly pay/stipend.

No student should be denied education due to lack of resources and no bank should be denied its EMI due to lack of systems and a nonchalant attitude, particularly on the part of better-off sections.

There might be need to amend many laws and regulations (such as equating educational loan EMIs with TDS and stamping passports). But it is necessary to look at the issue as one of attractive opportunities available for all sections as education by definition equalizes different classes in society.

But Government should not effort using the socialistic paradigms of the 1960s by creating funds or by being the guarantor for loans because this will increase NPAs as it will be felt that the “Ma-Baap Sarkar” will take care of the repayment. Such things send wrong signals.

Education is consider to play an important role of equalizer across class segments and if learning has to be acquired by borrowing, the only way out is to strengthen institutions, instruments and regulations in this sector so that the repayment process can be made speedy and correct and promptly to the banks.

However it is equally important that youngsters are made to realize their responsibilities for their actions and make them understand that they are role models for future generations.

Thus, repayment of money borrowed for education is a social responsibility. Let us not try to cosset segments that are already pampered enough.

Education loans to include life insurance

The government’s keen interest in education loans has continued. After the HRD Minister Arjun Singh, announced the government’s objective to guarantee education loans to students, the Government announced its intention to include a life insurance cover with every education loan.

Expressing the need to modify the existing education loan scheme, it has suggested all public sector banks (PSBs) to add a life insurance cover on any student going in for an education loan. All public sector banks (PSBs) may also be asked to introduce facility of online request for education loans.

Like their earlier step, the new scheme of an insurance policy on the life of the student, at the time of granting of education loan, is to benefit both the bank as well as the student. The issue of modifying the existing education loan scheme (2004) is likely to come up for discussion during the Finance Minister, Mr P. Chidambaram’s meeting with the chief executives of PSBs.

Speaking on the benefits of the insurance, official sources said that in case of an unfortunate demise of the borrower, the bank would be able to recover the loan amount from the insurance amount.

For the student, this would inculcate a habit of taking insurance. A student, who is once covered by life insurance, even after repaying the bank loan, would be inclined to continue with the life insurance policy.

However, this new scheme as suggested by the government has been in use by UBI. Union Bank already has a provision for an insurance policy in their education loan scheme. According to that scheme, to lessen the cost of premium, a convertible insurance policy (convertible into an endowment assurance policy for 5 years) could be accepted. According to the scheme, in cases where the parent/guardian cannot bear the premium cost, the amount of premium during the period of education could be remitted by the bank to LIC to the debit of loan account.

There are hints that the Finance Minister may ask the Indian Banks’ Association (IBA) to incorporate specific clauses for life insurance (on the lines of the Union Bank’s scheme) in the model education loan agreement circulated by it to banks for implementation. Also, IBA may be asked to provide broad guidelines to banks regarding the material to be published in the loan forms about insurance options available to students.

Meanwhile, there are indications that PSBs may be asked to provide facility of web-based online request for education loans. A presentation is likely to be made by Corporation Bank, which already offers such a facility.

Govt proposes to be as guarantor for education loans given to poor student

Government has stood up to help the students of the poorer sections to take loans for higher education. The government is planning to act as a counter-guarantor so that the financial burden does not fall entirely on the family.

During the international education fair organized by Assocham Union HRD Minister Arjun Singh announced, "We are actively considering the proposal."

He said if the proposal is approved, the government will stand in as a guarantor for students who take educational loans, so that the loan-obtaining process becomes easier and the family does not bear the brunt alone.

Giving clarification on the need for the government to provide counter-guarantee, HRD ministry sources said as per prevailing norms, an individual has to produce collateral for any loan above Rs 4 lakh.

"Indian Bank Association has not changed this norm for students seeking loans. As a result, the benefit of loan scheme would have reached only few. Therefore, government will have to intervene," officials said.

However it remains to be seen what action the finance ministry takes on the initiative taken by the HRD, though it is being considered in view of polls drawing close there are chances of the proposal of getting through.

The HRD minister has already put on all the efforts for this proposal, saying higher education could not be left to market forces, and that the government needed to be proactive.

Although Assocham had included the proposal among its recommendations on higher education, the HRD ministry has been working on this for some time.

Singh’s support comes barely a week after Congress chief Sonia Gandhi snubbed him at a public function, by praising PM Manmohan Singh for leaving his personal imprint on education reforms.

The HRD minister also stated that the state should play a key role in education. He added reforms in higher education should take in real sense and not to be undertaken just because the word "reform" has become fashionable.

Singh repeated that he is not "foreclosing opportunities" for cooperation with the outside world or the private sector, he said, "we should not be dependent on borrowed ideas".

He added, "It’s not that nothing good has come out of our education system. Look at the recent achievement by our space scientists".

The recommendations of Assocham’s were turned down by the minister — that higher educational institutes should be free to fix fees after keeping 25% seats reserved for the poor.

"Education cannot be bought and sold over the counter. Higher education will be meaningless if it is not accessible to all," Singh said.

Banks to provide education loan online

Soon six to seven banks in the country will be providing "Online loan application" facility from this academic year in a move to simplify education loan formalities.

Speaking on the occasion at the inauguration of 1327th branch of the Oriental Bank of Commerce Finance Minister P Chidambaram said the facility will be extended to all the banks in the course of this year itself.

He said in the last financial year the nationalized banks in India created a world record when they provided education loan to 12,51,692 students to the tune of Rs.19,771 crore.

"It is world record that a country holds. In no other country, such large number of students has been given education loan. I am not including the education loan extended by the private banks when I mention it is a world record. It is also a historic achievement. The loans help the middle class and poor people," Chidambaram said.

Finance Minister added next year scholarship facility will be extended to two lakh students for pursuing school education after the eighth standard, which has been planned for one lakh students for this year.

The scholarship scheme has been introduced for the best and meritorious students who are not able to pursue their education. The Rs 6000 per year scholarship scheme for poor meritorious students was decided in the cabinet meeting held on May 9.

Apart from this, he said, a separate pre-matric scholarship scheme has also been implemented for the children of those engaged in "menial jobs" to pursue higher education or ITI or diploma courses.

He added the 'Scheduled Caste meritorious students' scholarship scheme has been extended to 15,370 students, whereas 20,000 students will get benefited from the financial assistance given to the minorities to pursue their education. The government has also made plans to encourage students to pursue pure science and research activities and give special incentives for them.

"More schemes to promote higher education are on the anvil," he said without elaborating. Responding to the Opposition's challenge as to how the government would implement the farm loan waiver scheme, Chidambaram said, "we know how to provide for Rs 60,000 crore farm loan waiver that would benefit four crore farmers and it would be done before June 30. The Government targeted to provide farm loan to the tune of Rs.2,80,000 crore this year".

He said the government has given strict instructions to provide loan for all students who have secured seats in higher educational institutes and people should exploit the facility.

Govt. of India to subsidy on education loan rate to make higher education accessible

Rising inflation has disturbed budgets of majority households of middle and lower income groups. Everybody is planning their budgets from where to cut and where to add. There comes a hope of some relief in the near future for the lower and middle income group at the education front with the Government of India (GoI) planning to provide subsidy on education loan interest rate.

In an interview Prof Sukhadeo Thorat, chairman, University Grants Commission (UGC), told reporters that under the 11th five year plan, GoI have plans to create a Higher Education Loan Guarantee Authority (HELGA), which will come up with various provisions to help students, particularly of the middle and lower income groups, in securing education loans and scholarships for higher and professional education.

The main idea behind it is in the next five years to increase the overall enrolment rate in higher education to 15 per cent from the existing 10 per cent by establishing new universities and colleges and expanding the capacity of existing institutions. In the 11th plan there is also a proposal for fee levels, that fee levels should be increased gradually, subject to the upper limit of 20 per cent of the operating costs of the general university education.

Simultaneously, Prof Thorat said, to make higher education more accessible, there are plans to disburse scholarships to at least two per cent of the total students. He further added, GOI will itself become guarantor for the student applying for higher education loans and provide subsidy in the rate of interest during the moratorium period. Currently banks, are giving loans without collateral securities up to Rs 7 lakh but for a loan above Rs 7 lakh students have to arrange for guarantors, which in many cases are not available because applicants come from middle or low income groups.

"The modalities for HELGA and the amount of subsidy to be given on education loan interest are being worked out by the government and a definite plan will be rolled out within 2-3 months," said Prof Thorat, who was in the city on Tuesday to deliver convocation address at Babasaheb Bhimrao Ambedkar University.
UGC has also decided to provide financial assistance to poorly performing institutions under its "Bridging The Quality Gap" schemes.

According to NAAC analysis there are 20,676 colleges in the country, of which 16,000 come under UGC's purview. Till date The National Assessment and Accreditation Council (NAAC) has accredited 3,492 colleges, of which nine per cent were rated as A, 68 per cent were graded B and 23 per cent were categorized under the C grade.

Likewise, of 417 universities in the country, so far 140 have been assessed by NAAC, 31 per cent of which were graded as A, 61 per cent B and seven per cent C. Clearly, quality in majority institutions is ‘average' or ‘poor'. As per the data of NAAC analysis data there is a deficiency in human resources and infrastructure is the main reason for the gap between A and C. "Now UGC plans to provide one time grant to ‘C' grade institutions, with a condition of matching contribution.

Students pursuing IIM have to furnish collateral to get loan

The Indian Institutes of Management (IIMs) has hiked their fees therefore many general category students will have to approach banks of educational loans. To get the loan most of the students will have to furnish collateral to get that all-important loan to pay the increased fee.

For instance IIM-Ahmedabad, has almost trebled its fees to Rs 4 lakh to Rs 11.5 lakh. IIM-Kolkata has hiked it from Rs 5 lakh to Rs 7.5 lakh. Others like IIM Bangalore and IIM Lucknow have hiked it from Rs 5 lakh to Rs 8 lakh and Rs 4 lakh to Rs 5 lakh respectively.

If we see the expenses of students then add to that another Rs 3-4 lakh for laptops, books and others expenses, and the overall expense rises by another 30 per cent .Students, therefore, need to shell out anywhere between Rs 9-15 lakh for a two-year course.

Earlier students do not need to furnish collateral, but now students need to shell out anywhere between Rs 9-15 lakh for a two-year course and would start with a loan that they need to pay-off to free their collateral.

Although banks are ready to give loans to students studying in these institutes, the requirement for securities will increase. Till now, in India the maximum loan amount offered for studies was Rs 10 lakh.

The loan terms has been figured out like this no paperwork is required for the initial Rs 4 lakh. After that, there needs be a guarantor for a loan up to Rs 7.5 lakh. Above this, some collateral is required.

As per RBI guidelines, for loans up to Rs 4 lakh, the interest rate should not exceed the prime lending rate (PLR). Above Rs 4 lakh, the interest rate charged is PLR plus 1 per cent.

For instance, Indian Bank offers education loan schemes up to Rs 10 lakh for graduate, postgraduate and professional education in India. The current rate of interest is 12.50 per cent for loans up to Rs 4 lakh and 13 per cent for an amount above that.

Amit Roy (name changed), who recently passed out of IIM Lucknow, had taken an education loan of Rs 7.2 lakh. Today, he is paying Rs 14,000 a month as equated monthly installments (EMIs), which is around 20 per cent of his take-home salary. And he will continue to do so for the next 7 years. "Most of my colleagues are paying installments now," he admits.

Thus, even the crème-de-la-crème of students will start their careers with a loan in their balance sheets. Imagine getting the first salary cheque with an equated monthly installment (EMI) deduction. This not new for IIM students they have had to resort to educational loans for a while now.

Rajeev Mishra (name changed), who has completed a year in IIM-Kolkata, had taken a loan of Rs 7.5 lakh from the State Bank of India last year. Similarly, there are many others who have taken loans. All of them are hoping their salaries will be more than make up for the amount borrowed.

Over the years the banks have geared up loan schemes to meet the demands of aspiring IIM and IIT students because the repayment ability is there.

D Krishnamurthy, general manager, Bank of India, said: "With the hike in the IIM fees, we are looking at providing the students with bigger loans by raising the limit."

CorpBank and IIM, Ahmedabad sign MoU to provide educational loan

Corporation Bank and Indian Institute of Management, Ahmedabad signed a MoU to help students get educational loans to pursue for higher studies.

The bank and the institute have mutually agreed to have tie-up arrangement for the students to pursue higher studies by availing educational loans from the Bank.

According to a bank release under the MoU, both Corporation Bank and IIMA will work in close coordination through their branches/office. The institute will recommend the bank as a preferred financier for granting education loans to its bonafide students pursuing regular full time academic program and the bank will accept its nomination as a preferred financier for education loans.

The bank release stated, "Apart from education loan, the bank also extends assistance for purchasing accessories such as laptops and personal computers to aid students in their studies".

At the time of discussion IIMA showed keen interest in the "Branchless Banking" model developed by the Bank, which aims to take technology to the remotest villages of the country for providing banking facility.

Govt plans to subsidize interest of educational loan

On Tuesday Minister of State for Human Resource Development D Purandeswari informed Lok Sabha that the government is working out a plan to subsidize the interest component during the moratorium period on education loans taken by students having lower than a specific parental income for pursuing professional education in India.

In a reply to a question the minister said, "A proposal to introduce a scheme for providing interest subsidy during the moratorium period on the education loans taken by students having lower than a specific parental income, for pursuing professional education in India under the revised Model Educational Loan Scheme formulated by the Indian Banks' Association, is under consideration of the government."

She said in the 11th plan a provision of Rs 4,000 crore has been allocated for this proposed scheme.

In a reply to another question Purandeswari said the Indira Gandhi National Open University (IGNOU) has launched many certificate courses and diploma programs. She informed a six month certificate course on HIV/AIDS and Family Education (CAFE) was started in 2002.

The Minister said from the academic session 2003 a diploma program on HIV/AIDS and Family Education (DAFE) was started and the course on social work with compulsory courses on HIV/AIDS and Family Education and Substance Abuse was introduced in academic year 2004.

NBCFDC disbursed loan amongst 10 lakh backward class families

The National Backward Classes Finance and Development Corporation (NBCFDC) distributed loan amongst the families belonging to the Backward Classes living below the poverty line. About 10 lakh families got the benefit of this loan.

According to the official release the NBCFDC has assisted more than 1.21 lakh beneficiaries by disbursing a loan amount of Rs 141.31 crore during 2007-08. Through accruing process it has assisted more than 9.51 lakh families of Backward Classes living below the poverty line with a loan amount of Rs 1,364.77 crore.
The commission through Self Help Groups (SHG) has started Micro Finance Schemes and Educational Loan Scheme 'New Akanksha' for technical and professional courses at graduate and higher levels.

As per the reports of the corporation against paid up capital of Rs 491.35 crore, the Corporation has disbursed Rs 1,364.77 crore at the end of Financial Year 2007-08.


Loan amount of Rs 873.42 crore over and above the budgetary support was disbursed by recycling of repayments and recoveries and efficient management of internal resources.

Corporation Bank the first one toCorporation Bank the first one to provide online education loan provide online education loan

Speaking on the inauguration of the new building -Expert Residency- of the Expert Educational and Charitable Foundation (EECF), near Kalakunj Road in Mangalore on Sunday, Sambamurthy said that their bank has become a role model for the entire nation for introducing online education loan.

Bank Chairman B Sambamurthy said the Corporation Bank is the first bank in the country to offer online education loan to students for pursuing higher studies

He maintained that “Even the central government has advised all other national banks to follow our bank while introducing online education loan scheme.”

The bank has sanctioned around Rs 400 crore loans to students for higher education, adding to this he said that the bank has shown 45 per cent growth in education loan sector.

The bank has a motto that “none of the deserved students should not be deprived of pursuing higher education just because of lack of money”, he added.

Discussing about the scenario of Human Resources in India, Sambamurthy said that earlier, there was a time when people used to chase companies to get a job.

But now, he pointed out that the scenario has changed most of the national and multinational companies are trying to fill up the vacancies. Recruiting manpower had become a big challenge for companies, he added.

While praising the success of EECF, Sambamurthy said that the wonderful partnership between the Corporation Bank and the institute have produced better result.

“If we are ready to meet the challenges in time, the growth rate, individual as well as national, will double the target,” he asserted.

Deputy Commissioner M Maheshwar Rao stated that standard of excellence was the criteria which depends on the possibility of success.

FM asks PSU banks to clear education loan in a set period of time

On Tuesday again the Finance Minister reiterated that the public sector banks must clear education loans within a period of 15 days to one month and banks should also set up an online system for speedy clearing of loans.

In his reply given to Rajya Sabha Chidambaram, said, "As per the norms prescribed under the Model Education Loan Scheme, the banks are required to dispose of loan applications within a period of 15 days to one month." However he said as per the reports from the PSU banks time period condition is being taken care of where the applications were found complete in all respects.


The Finance Minister stated, the government has directed the banks to set up an online system of loan applications. This will make possible for the students to download the loan application form, apply online and learn the status of their loan application, Chidambaram said, online facility is now being provided by all major public sector banks.

As per the report received from the RBI he said educational loans worth Rs 18,992 crore were excellent as on November 23, sanctioned by the public sector banks.

Educational institutes expect a hike in education loan limit

In the recent years there has been increase in the cost of the education. Most of the educational institutions and people from this industry are expecting from the government to raise in the limit in the coming Budget, from Rs 4 lakh to Rs 5.50 lakh without collateral security.

"Keeping in view the expenses incurred by a student in a business school, the collateral free education loan limit should be fixed at Rs 5.50 lakh," said Amity University Professor Gurinder Singh.

He added that in the last 3-4 years, the management graduates are earning in lakhs. They can easily pay back loans after getting jobs.

The industrial chambers, including FICCI, have also requested the Finance Minister P Chidambaram to offer liberal funds for educational loans as the industry is facing a severe shortage of skilled manpower in manufacturing and service sector.

The industry had said that education loan to the students should be more easily accessible who intend to take up higher education.



Currently, banks provide educational loans up to Rs 4 lakh without collateral security and up to Rs 7.5 lakh with security.

Even the Human Resource Development (HRD) Ministry has also proposed to offer financial support to students below the "creamy layer" in a bid to ensure access for all professional education.

IBA introduces insurance –linked education loan scheme

The Indian Banks’ Association (IBA) has come up with an idea of a model education loan scheme which involves a higher increase in loan. Though this scheme will be more expensive, lending standards are due to become tighter for loans for overseas education.

Under this scheme Public sector banks will be offering insurance-linked education loans. The insurance premium will be a part of the expenses for the loan.

Under the scheme the loan limit has been increased from Rs 7.5 lakh to Rs 10 lakh for studies in India and from Rs 15 lakh to Rs 20 lakh for studies overseas. Addition to this, there will be a provision of top-up loan for students for further studies. A limit of sorts has been fixed for the cost of such loans — the rate of interest have to be within the benchmark prime lending rate (BPLR) for loans up to Rs 4 lakh. And for loans over this limit, the rate of interest should not be more than 100 basis points over the BPLR.

Moreover some banks including the State Bank of Hyderabad and the Union Bank of India are providing educational loans at special rates of interests for girl students.

Under the scheme, life policies and mutual fund units will now be as allowed security for the loan. Banks will be able to lend multiple loans to a single family. Education loans will now be given for aeronautical engineering, pilot training, and shipping training as part of eligible courses.

The loans for overseas education the norms will be stiffer. For loans between Rs 4 lakh to Rs 7.5 lakh, banks will entail more restrictive security by including co-obligation of parents. A banker said this has been done due to rising NPAs in this segment, when parents claimed that they were not responsible for the loan repayments of their wards.

Also, banks will now charge upfront, the processing fees for education loans for studies abroad. Banks will be issuing a unique identification number or an identity card for loans for studies overseas.

Haryana Govt. revises Loan grants scheme for SC students pursuing higher studies

The Haryana Government in order to provide more facilities to the Schedule Caste students to go for higher studies, revised the loan grants scheme offered to Scheduled Castes students for pursuing post-matriculation and higher studies any where within the state.

On Wednesday V. Umashankar, deputy commissioner, Sirsa district, said earlier students pursuing their post-matriculation studies used to get a loan of Rs 800 per year for purchase of books and stationery. Under the new scheme such students will get Rs 2,000 per annum and that too as non-refundable grant.

According to the new scheme, students will be entitled for funds to purchase books and stationery with the added facility of not refunding the money received from the government under this head.

The government also took the decision to hike the amount paid under the grants. Students pursuing their postgraduate degrees shall be entitled to Rs 4,000 instead of Rs 1,500 given earlier and those opting for professional course would be entitled to Rs 6,000 instead of Rs 2,000 being given earlier for the purchase of books and stationery.

Furthermore, the government has plans to extend the Dr Ambedkar Scheme to the students of Backward Classes. Earlier the scheme was applicable for only Scheduled Caste students of class XI and XII. As per this scheme, now, students of unprivileged sections of the society will receive a monthly stipend of Rs 1,000.

FM: 12 lakh students reap the benefit of educational loans

Union Minister for Finance P Chidambaram revealed that around 12 lakh students all over the country had obtained the benefit of educational loans up to the value Rs 16,000 crore.

At the inaugural function of the 1008th branch of Vijaya Bank at Rangiyam in Tirumayam taluk, the Finance Minister observed that Vijaya Bank, one of the nationalised banks since 1980, had achieved a fast growth to reach the 1008th mark.

With the opening of new branch around 15,000 people of five panchayats - Rangiyam, Midhilaipatti, Kuruvikondanpatti, Sethurapatti and Kannanur, would be benefited. The bank has been offering loans under the heads of education, agriculture, small scale industries and SHG entrepreneurship.

Loans are also given to washer men and barbers at the rate of four per cent interest. In the current year the target for agri loans has been fixed at Rs 2.25 lakh crore which is likely to be go beyond by another Rs 10,000 crore.

There is also a scheme for the rehabilitation of the physically- challenged by creating one lakh job opportunities which is to be introduced at an expenditure of Rs 1,800 crore. Gramin Rozgar Yojana (National Rural Employment Guarantee Program) will be executed in the district from April onwards.

This will make possible for a laborer to earn a daily wage of Rs 80- 100. Vijaya Bank Chairman and MD Prakash Mallaiya said that the bank’s transactions were at Rs 72,000 crore.

It is expected to reach the figure of Rs one lakh crore by 2008-09. Mallaiya added there are plans to increase the number of branches to 1,050 by year end.

For aspirant students studying abroad becomes cheaper

The Reserve Bank of India’s (RBI’s) has taken a decision to reduce risk weight age on educational loans to 75 percent from 125 per cent Following this decision of RBI will become easier to get the loan for those who have plans to take loan to pursue studies abroad.

Though, the move is unlikely to bring any immediate reduction in interest rates. But it is thought that this will increase the funds available with banks for lending.


“The RBI’s decision to reduce risk weightage on education loans will increase the quantum of lending for the purpose of education. This will not translate to any reduction in rates as the capital release on account of the reduction in risk weight will be minimal. However, we will now be able to lend more. The non-performing loans in this portfolio are low as banks now ask parents to guarantee the loan availed,” said MV Nair, chairman and managing director, Union Bank of India.

At present, interest rates on educational loans float in the range of 11 to 11.50 per cent. On an average, banks lend a maximum of Rs 7.5 lakh for studies in India and a maximum of Rs 15 lakh for studies abroad. The interest rate on loans up to Rs 4 lakh is attached to the bank’s benchmark prime lending rate (BPLR).

Loans in more than Rs 4 lakh are charged one percentage point over the BPLR. “This change comes with the government’s thrust on educational loans. The change in risk weight will not lead to immediate change in interest rates,” said TS Narayanasami, chairman and managing director, Bank of India.

It is believed the the reduction in risk weight, along with priority sector lending status to education loans, should give a momentum to growth in lending of the education loans.

Loans given to individuals for educational purposes up to Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad qualify as priority sector lending. According to RBI data banks granted educational loans to the tune of Rs 16,926 crore as on August 17, 2007.

V Santhanaraman, executive director, Bank of Baroda, said: “With the cut in risk weightage, banks will be able to give more educational loans. However, it does not mean that banks will reduce the rate of interest on educational loans immediately.”