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.