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."
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