Since the launch of education loan scheme there has been increase in the number of loan borrowers. The higher education is getting costlier therefore more and more students are taking loan from banks to fund their college fees and other study material instead of reducing their parents’ bank balance.
As per the data available in 2001-02 when the education loan scheme was started banks had disbursed around Rs 700 crore. In the current year, loan of around Rs 6,576 crore was disbursed. By the end of August the total amount of outstanding educational loans stood at Rs 32,017 crore.
Apart from increasing cost of education, the two other factors are responsible for the increase in the demand. One is banks find education loans safe thus more and more banks are offering education loan. The second one is banks are ready to give loan for courses offered by less-known institutes also.
In general the returns of the loan are good and defaults are few and far between. H Rathnakara Hedge, executive director of Oriental Bank of Commerce on behalf of his bank said, “It is a good business for us”. But in general what is true of OBC is true of other banks also.
But four years ago the situation was different, at that time higher education, especially in top professional institutes was still cheap by today’s standards. But with the start up and increase in the number of private institutes, with no exceptions, education is expensive, loans have made easy to get into college as buying a car on EMIs has.
Aggressiveness has made possible for banks to get business. Apart from Hegde of OBC, others too agree with it. Earlier banks used to give loans to only those students who went abroad for higher studies. Late on they started giving loans to students studying in reputed Indian Institutes. Now, students studying in colleges in the B league are also being considered for loan. For instance, Central Bank of India general manager, B N S Ratnakara agreed there is aggression in selling loans to students in low-rung colleges.
IDBI Bank personal banking group head, C S Jain told bank’s education loan portfolio up to 60 per cent has been mainly sanctioned to students studying in institutes other than IITs and IIMs.
The higher the fee structure in a college, the loan demand from banks increases. As IIM education is expensive, thus the loan demand for studies in these institutes has remained high. While at IITs, due to high level of subsidy the demand for loan is quite low.
The Bank of Baroda experience is almost the same. Nandan Srivastava, one of its general managers told the bank has witnessed high demand for loan from non-IIT, non-IIM academies. At the time of sanctioning the loan banks do consider the placement record of an institute, as from this bank judge the repayment ability of the students.
Normally the interest rates charged by the banks differ only marginally. But to the students of premier institutes like the IITs, the IIMs and AIIMS are offered more equal than others. The students of these institutes pay between 0.5 per cent and 1 per cent less than students in not so famous institutes. As these are India’s best institutions, their students get high-paid jobs more easily than others.
Now the awareness for such loans is far greater in as against it was four year ago, this has increased loan demand from students in all kinds of institutes. Even the ratio of loan portfolios in institutes other than the IITs and the IIMs is increasing in most banks, including OBC.
The public sector banks, by assets are owned by the government, so they have to mandatory get into social sector lending first. Moreover education loans, not necessarily by definition in social sector, are a business dominated by these banks.
Banks are not depending on direct lending but also tying up with institutes to increase business. For instance, OBC has tied-up with number of institutes, including IIPM, ICFAI, Amity University, NIIT, Ansal Institute of Technology, to provide funds to the students of these institutes. For this bank has a firm body of clientele guaranteed.
On the other hand institutes are also encouraging multiple banks to work with them. For instance, Amity has also tied-up with Allahabad Bank. The institution’s chancellor Atul Chauhan explained that tie-ups help in faster processing of loans. In his university four out of every 10 students taking admission look for bank funding.
Birla Institute of Management Technology has tie-ups with a trio banks: Canara, UCO and HDFC Bank. According to Rahul Singh, an assistant professor, a quarter of its students have taken loans from banks. Though, such tie-ups do not mean cheaper loans.
However banks consider offering loans to students of reputed institutes safe as in any other. Now the placements are gradually increasing and defaults have been negligible. Also irrespective of institutes, banks are also taking adequate precautions to lower the scope of defaults.
According to IDBI Bank’s Jain when his bank sanction loan, it takes into consideration the future earning potential of a borrower. Banks avoid obliging students of institutes with a troubled placement record.
Central Bank’s Ratnakara also give a word of caution, though, “The real NPA position on education loans is still not clear.” He said till now nothing has come out regarding lending to students of less known colleges will add to the bad assets of banks, however, added, the “preliminary trend does not suggest anything of that sort.”
Monday, December 7, 2009
Friday, November 13, 2009
Tata Indicom in association with Cooperation Bank and PayMate launch ‘Green Money Transfer in India’
A unique person-to-person mobile money transfer service ‘Green Money Transfer’ is being launched by Tata Indicom, India's leading cellular service provider. The service will be launched in association with Cooperation Bank and PayMate, India's leading wireless transactions platform provider.
The PayMate technology, Corporation Bank’s banking system and Tata’s PCO and True Value Shop (TVS) network will enable transfer of funds via mobile. Tata Indicom is the first private telecom operator in India to enter into such partnership wherein a PCO/TVS is used as the start point for person-to-person money transfer.
With the launch of this service any mobile phone user will be able to send or receive money instantly using their mobile phone authorized to transfer. To transfer funds, the customer has to simply go to the nearest Green registered TATA PCO or TVS and place a request for money remittance (Upto Rs. 5000) to any person across the country. Likewise the recipient can collect the transferred money at the nearest Green TATA PCO or TVS with a transaction authorization code received from the sender.
During the lunch, Mr. Lloyd Mathias, Chief Marketing Officer, Tata Teleservices Limited, said, "This is a moment of pride for us, as we have become the first private telecom operator to enter into such a unique partnership and bring forth this fantastic proposition for our customers. ‘Green Money Transfer' is an industry-first and enables anyone using a cell phone to transfer money in a safe and flexible environment. Being the leading operator in the PCO segment we wanted to leverage our strength and enable a highly efficient money transferring service for the customers even in remote areas and going forward we hope to extend more such M-commerce solutions for our customers."
The aim behind launch of Green Money transfer service is mainly to target the un-banked population of the country to provide branchless banking service for them to send and receive money easily. In comparison to other money transferring services provided for remote access areas, this service is secure and speedy.
Speaking at the launch of the service, Shri J. M. Garg, Chairman & Managing Director Corporation Bank said, "This facility is being proposed as an additional service to the rural masses that can now receive remittance in their Bank account instantaneously and draw through Business Correspondents at their own place. This will enable the Bank to augment customer acquisition as well. This facility has been launched on a pilot basis in Kerala which has a large migrant population. On successful launch the facility will be spread to other areas."
At the launch Mr. Ramesh Iyer, Head-Enterprise Business, Tata Teleservices (Maharashtra) Limited said, "Both the banking and telecom sectors have seen frenetic activity over the last couple of years. The mobile screen offers a new medium to banks to proliferate their services while opening up a new and innovative revenue stream for the telecom operators. This also translates into an excellent micro banking solution to the end consumer especially in the rural areas - a vital step towards accelerating financial inclusion. It is a win-win partnership for the industry and the economy at large. The mobile screen is slated to change the way people transact and we at Tata Indicom are happy to partner and pioneer the revolution."
At the launch speaking about partnership, Ajay Adiseshann, MD & Founder, PayMate said, "PayMate has always been at the fore-front of innovations in M-commerce. Having realized the gap in the market for people who seek easy, quick and convenient means of transactions, with 'Green Money Transfer' we offer a safe, reliable and secure system for transfer of funds especially for the un-banked population in remote access areas echoing the sentiments and mandate of the Government and the Regulators. With over Rs. 600 billion (12.75 billion USD) being remitted across the country, this presents a great opportunity for all of us to tap into and we are confident that the service will redefine the way financial services are approached."
To use the service simple steps are to be followed:
Customers have to register for this service at a Green TATA PCO, TVS or with Corporation Bank. After getting registered, they will be given mPIN to enable them to authorize the transaction.
The procedure of transfer of funds:
1. Sender in Mumbai visits a Green Tata PCO or TVS and places a request for transfer of Rs. 5000 to his parents in Pune.
2. The sender hands over the cash to Green Tata PCO or TVS. The PCO or TVS triggers an IVR call to the sender.
The sender enters mPIN to authorize the transaction and a Transaction code is displayed on his mobile to be conveyed to the recipient.
The recipient visits nearest registered Tata PCO or TVS and shares the transaction code.
The PCO or TVS triggers an IVR call to the receiver who enters his/her mPIN to verify the transaction
6. After verification the cash is handed over to the recipient.
The PayMate technology, Corporation Bank’s banking system and Tata’s PCO and True Value Shop (TVS) network will enable transfer of funds via mobile. Tata Indicom is the first private telecom operator in India to enter into such partnership wherein a PCO/TVS is used as the start point for person-to-person money transfer.
With the launch of this service any mobile phone user will be able to send or receive money instantly using their mobile phone authorized to transfer. To transfer funds, the customer has to simply go to the nearest Green registered TATA PCO or TVS and place a request for money remittance (Upto Rs. 5000) to any person across the country. Likewise the recipient can collect the transferred money at the nearest Green TATA PCO or TVS with a transaction authorization code received from the sender.
During the lunch, Mr. Lloyd Mathias, Chief Marketing Officer, Tata Teleservices Limited, said, "This is a moment of pride for us, as we have become the first private telecom operator to enter into such a unique partnership and bring forth this fantastic proposition for our customers. ‘Green Money Transfer' is an industry-first and enables anyone using a cell phone to transfer money in a safe and flexible environment. Being the leading operator in the PCO segment we wanted to leverage our strength and enable a highly efficient money transferring service for the customers even in remote areas and going forward we hope to extend more such M-commerce solutions for our customers."
The aim behind launch of Green Money transfer service is mainly to target the un-banked population of the country to provide branchless banking service for them to send and receive money easily. In comparison to other money transferring services provided for remote access areas, this service is secure and speedy.
Speaking at the launch of the service, Shri J. M. Garg, Chairman & Managing Director Corporation Bank said, "This facility is being proposed as an additional service to the rural masses that can now receive remittance in their Bank account instantaneously and draw through Business Correspondents at their own place. This will enable the Bank to augment customer acquisition as well. This facility has been launched on a pilot basis in Kerala which has a large migrant population. On successful launch the facility will be spread to other areas."
At the launch Mr. Ramesh Iyer, Head-Enterprise Business, Tata Teleservices (Maharashtra) Limited said, "Both the banking and telecom sectors have seen frenetic activity over the last couple of years. The mobile screen offers a new medium to banks to proliferate their services while opening up a new and innovative revenue stream for the telecom operators. This also translates into an excellent micro banking solution to the end consumer especially in the rural areas - a vital step towards accelerating financial inclusion. It is a win-win partnership for the industry and the economy at large. The mobile screen is slated to change the way people transact and we at Tata Indicom are happy to partner and pioneer the revolution."
At the launch speaking about partnership, Ajay Adiseshann, MD & Founder, PayMate said, "PayMate has always been at the fore-front of innovations in M-commerce. Having realized the gap in the market for people who seek easy, quick and convenient means of transactions, with 'Green Money Transfer' we offer a safe, reliable and secure system for transfer of funds especially for the un-banked population in remote access areas echoing the sentiments and mandate of the Government and the Regulators. With over Rs. 600 billion (12.75 billion USD) being remitted across the country, this presents a great opportunity for all of us to tap into and we are confident that the service will redefine the way financial services are approached."
To use the service simple steps are to be followed:
Customers have to register for this service at a Green TATA PCO, TVS or with Corporation Bank. After getting registered, they will be given mPIN to enable them to authorize the transaction.
The procedure of transfer of funds:
1. Sender in Mumbai visits a Green Tata PCO or TVS and places a request for transfer of Rs. 5000 to his parents in Pune.
2. The sender hands over the cash to Green Tata PCO or TVS. The PCO or TVS triggers an IVR call to the sender.
The sender enters mPIN to authorize the transaction and a Transaction code is displayed on his mobile to be conveyed to the recipient.
The recipient visits nearest registered Tata PCO or TVS and shares the transaction code.
The PCO or TVS triggers an IVR call to the receiver who enters his/her mPIN to verify the transaction
6. After verification the cash is handed over to the recipient.
Tuesday, November 3, 2009
Govt. to provide security cover to education loans
The government is planning to reduce public sector banks worries against any default on education loans. The PSBs are often not willing to give these loans as such loans do not have enough guarantees. Therefore the government is proposed to provide cover to education loan under a new credit guarantee scheme, following this government has asked the Indian Banks’ Association (IBA) to prepare a draft proposal, informed a senior official with the finance ministry. It is expected this will make easy to take education loan.
There have been sharp increase in education loan offtake of up to Rs 32,460 crore which is mainly a unsecured loan (without any collateral), thus senior officials of PSBs have expressed their worries as such a large loan amount can impact the strength of the banks, especially in case of default as no collateral security is attached to such loans.
IBA chairman MV Nair, who is also the chairman and managing director of Union Bank, informed that body is preparing the draft of the scheme. He added, “The IBA will form a committee of experts that will formulate such schemes. We are in the initial stages”.
The government is thinking of working out a similar mechanism as of the credit guarantee scheme for micro and small enterprises (MSEs), stated a government official.
Under credit guarantee schemes, the Small Industries Development Bank of India (SIDBI) provides protection to the credit worthiness of borrower in case of default.
By charging a marginal fee, SIDBI gives guarantee up to 85% for loan up to Rs 5 lakh and 75% for Rs 5 to Rs 50 lakh. In the case of Rs 50 lakh to Rs 1 crore loans, the cover provided is at the rate of 75% for the first Rs 50 lakh and 50% for the balance amount.
The education loan scheme under which financial support is provided from the banking system to deserving meritorious students for pursuing higher education in India and abroad, was introduced in 2001.
Under this scheme banks do take any collateral or guarantee from the borrower for loan up to Rs 4 lakh, but for loan between Rs 4-7.5 lakh, banks can ask for guarantee or collateral and beyond this, banks definitely take collateral. In consultation with the government, IBA has suggested its member banks that they should not reject education loan application or pass on to the other PSU bank on flimsy grounds.
A top banker pointed out, “In February, following IBA’s directive, some banks have started giving 50% concession in interest rates on education loans to girl students for pursuing higher education in India or abroad but most banks are still reluctant”.
The banker said as the average size of the education loan is less than Rs 2 lakh, therefore it effectively means that these loans do not have enough collateral or guarantees.
As PSBs or individual banks together have major exposures in education loan therefore some protective mechanism is required.
As on March 2009 the total outstanding education loans of public sector banks amounted to Rs 27,646 crore, a 39.51% increase from Rs 19,817 crore. Banks such as Punjab National Bank and Oriental Bank of commerce were having exposures of Rs 1,901.56 crore and Rs 910 crore, respectively, by the end of September 2009.
There have been sharp increase in education loan offtake of up to Rs 32,460 crore which is mainly a unsecured loan (without any collateral), thus senior officials of PSBs have expressed their worries as such a large loan amount can impact the strength of the banks, especially in case of default as no collateral security is attached to such loans.
IBA chairman MV Nair, who is also the chairman and managing director of Union Bank, informed that body is preparing the draft of the scheme. He added, “The IBA will form a committee of experts that will formulate such schemes. We are in the initial stages”.
The government is thinking of working out a similar mechanism as of the credit guarantee scheme for micro and small enterprises (MSEs), stated a government official.
Under credit guarantee schemes, the Small Industries Development Bank of India (SIDBI) provides protection to the credit worthiness of borrower in case of default.
By charging a marginal fee, SIDBI gives guarantee up to 85% for loan up to Rs 5 lakh and 75% for Rs 5 to Rs 50 lakh. In the case of Rs 50 lakh to Rs 1 crore loans, the cover provided is at the rate of 75% for the first Rs 50 lakh and 50% for the balance amount.
The education loan scheme under which financial support is provided from the banking system to deserving meritorious students for pursuing higher education in India and abroad, was introduced in 2001.
Under this scheme banks do take any collateral or guarantee from the borrower for loan up to Rs 4 lakh, but for loan between Rs 4-7.5 lakh, banks can ask for guarantee or collateral and beyond this, banks definitely take collateral. In consultation with the government, IBA has suggested its member banks that they should not reject education loan application or pass on to the other PSU bank on flimsy grounds.
A top banker pointed out, “In February, following IBA’s directive, some banks have started giving 50% concession in interest rates on education loans to girl students for pursuing higher education in India or abroad but most banks are still reluctant”.
The banker said as the average size of the education loan is less than Rs 2 lakh, therefore it effectively means that these loans do not have enough collateral or guarantees.
As PSBs or individual banks together have major exposures in education loan therefore some protective mechanism is required.
As on March 2009 the total outstanding education loans of public sector banks amounted to Rs 27,646 crore, a 39.51% increase from Rs 19,817 crore. Banks such as Punjab National Bank and Oriental Bank of commerce were having exposures of Rs 1,901.56 crore and Rs 910 crore, respectively, by the end of September 2009.
Friday, October 30, 2009
Finance Ministry to prepare note on insurance cover for study loans
The bank heads met Union finance Minister Pranab Mukherjee and requested him to show concern to a scheme to insure study loans.
After the meeting a banker told, “The ministry will work out a note and the Indian Banks Association will then take this forward”.
In the meeting the bankers while expressing their concern on educational loans said these loans are becoming the matter of big worry for them so they want a scheme should be formalized to insure such loans.
In the past couple of years some of the banks especially the public sector banks were aggressive in giving education loans but now they are feeling heat, as the job market conditions are still not giving any positive indications of recovery.
A number of banks are worried about an increase in non-performing assets from these loans in the near future.
The main fear of banks is loans taken by students for studying abroad. According to a banker, “There is a concern about whether a person taking a loan and going abroad will be traceable tomorrow. Or a person who has taken a loan without any guarantees and goes away”.
Bankers stated if the government implement the insurance cover scheme for educational loans, then it would be easy for banks to improve lending in this sector.
At present on some home loan schemes there is insurance cover. The bankers added, the premium on such cover can be as much as Rs 25,000 a year for a Rs 15 lakh loan.
After the meeting a banker told, “The ministry will work out a note and the Indian Banks Association will then take this forward”.
In the meeting the bankers while expressing their concern on educational loans said these loans are becoming the matter of big worry for them so they want a scheme should be formalized to insure such loans.
In the past couple of years some of the banks especially the public sector banks were aggressive in giving education loans but now they are feeling heat, as the job market conditions are still not giving any positive indications of recovery.
A number of banks are worried about an increase in non-performing assets from these loans in the near future.
The main fear of banks is loans taken by students for studying abroad. According to a banker, “There is a concern about whether a person taking a loan and going abroad will be traceable tomorrow. Or a person who has taken a loan without any guarantees and goes away”.
Bankers stated if the government implement the insurance cover scheme for educational loans, then it would be easy for banks to improve lending in this sector.
At present on some home loan schemes there is insurance cover. The bankers added, the premium on such cover can be as much as Rs 25,000 a year for a Rs 15 lakh loan.
Thursday, October 29, 2009
Education loan helpline launched for government schoolchildren
In Chennai a helpline has been launched for the students of class XII so that they can get information on education loans for higher studies. This facility has been launched by the Gandhian Youth for Peace Trust and Rural Development.
A Suresh Anand, managing trustee of the organization informed that most students studying in government schools don’t have any knowledge of formalities and procedures relating to obtaining an education loan. During the launch of the initiative Annand stated, "Students from private schools are aware of the procedures but we want to consolidate the information, especially for students of Class XII. There are 45,000 students in corporation schools across the 10 zones of the city. We want to reach out to all of them".
Former chief education officer (CEO) C Vijayalakshmi will be the in charge of the helpline. She told in 2006 two students had committed suicide during her tenure as CEO of Perambalur district as they were not aware how to approach the bank manager for a loan. She added, "These students are able to bag ranks and get certificates but lack communication skills. Also, they lack the self-confidence to repay the loan and think they cannot find a suitable job to do so. We want to help them and clear their doubts".
A Suresh Anand, managing trustee of the organization informed that most students studying in government schools don’t have any knowledge of formalities and procedures relating to obtaining an education loan. During the launch of the initiative Annand stated, "Students from private schools are aware of the procedures but we want to consolidate the information, especially for students of Class XII. There are 45,000 students in corporation schools across the 10 zones of the city. We want to reach out to all of them".
Former chief education officer (CEO) C Vijayalakshmi will be the in charge of the helpline. She told in 2006 two students had committed suicide during her tenure as CEO of Perambalur district as they were not aware how to approach the bank manager for a loan. She added, "These students are able to bag ranks and get certificates but lack communication skills. Also, they lack the self-confidence to repay the loan and think they cannot find a suitable job to do so. We want to help them and clear their doubts".
Wednesday, October 21, 2009
Indian students spirits are high, approaching banks for education loan to fund studies abroad
Although the job options in West might be bleak but the spirits of Indian students are high they are approaching banks for education loan to fund their studies abroad.
This year the Indian students are taking loans of higher amount in comparison to those disbursed in the past. Moreover the students have changed their move, now they are opting for courses beyond the traditional geographies like the US and UK and also have widen their choice of courses.
The banks also claim that this year there has been increase in the overseas loan applications as against what they used to get before slowdown. The banks pointed out this year most of the students have applied for loans of higher amount than the maximum limit sanctioned by the banks themselves. an official, from the corporate office of Syndicate Bank said, “Previously a large number of foreign study loans used to be with the Rs 7.5 lakh range. Now the demand seems to have gone up to Rs 20-25 lakh and occasionally even Rs 30 lakh, which is beyond the bank’s maximum limit of Rs 20 lakh”.
Looking at the changing trend in the market, about a year ago the Oriental Bank of Commerce (OBC) had raised its maximum limit for overseas education loans from 15 lakh to Rs 20 lakh about a year ago.
Recently the State Bank of India, the largest education loan lender has slashed interest rates for education loans, sanctioned between May and September this year.
The bankers informed this year many Indian students are showing interest in countries like Australia and New Zealand, which are slightly cheaper as against the established education hub like the US. According to Syndicate Bank sources in terms of number of loans disbursed most of the students had applied for Australia, while in terms of size largest loans were disbursed for education in the US.
However there are some programs for which banks are taking caution while sanctioning loans. SC Sinha, executive director of Syndicate Bank pointed out, “Banks have been cautious of lending for pilot courses as well as air hostess training courses”.
Most of the banks said in spite of bleak employment situation in banking and financial institutions in the West, they are still giving loans for foreign degrees in finance and management. The Syndicate bank official maintained that although there have been no change in policy in terms of lending, then also banks are taking usual precautions in sanctioning education loans.
This year the Indian students are taking loans of higher amount in comparison to those disbursed in the past. Moreover the students have changed their move, now they are opting for courses beyond the traditional geographies like the US and UK and also have widen their choice of courses.
The banks also claim that this year there has been increase in the overseas loan applications as against what they used to get before slowdown. The banks pointed out this year most of the students have applied for loans of higher amount than the maximum limit sanctioned by the banks themselves. an official, from the corporate office of Syndicate Bank said, “Previously a large number of foreign study loans used to be with the Rs 7.5 lakh range. Now the demand seems to have gone up to Rs 20-25 lakh and occasionally even Rs 30 lakh, which is beyond the bank’s maximum limit of Rs 20 lakh”.
Looking at the changing trend in the market, about a year ago the Oriental Bank of Commerce (OBC) had raised its maximum limit for overseas education loans from 15 lakh to Rs 20 lakh about a year ago.
Recently the State Bank of India, the largest education loan lender has slashed interest rates for education loans, sanctioned between May and September this year.
The bankers informed this year many Indian students are showing interest in countries like Australia and New Zealand, which are slightly cheaper as against the established education hub like the US. According to Syndicate Bank sources in terms of number of loans disbursed most of the students had applied for Australia, while in terms of size largest loans were disbursed for education in the US.
However there are some programs for which banks are taking caution while sanctioning loans. SC Sinha, executive director of Syndicate Bank pointed out, “Banks have been cautious of lending for pilot courses as well as air hostess training courses”.
Most of the banks said in spite of bleak employment situation in banking and financial institutions in the West, they are still giving loans for foreign degrees in finance and management. The Syndicate bank official maintained that although there have been no change in policy in terms of lending, then also banks are taking usual precautions in sanctioning education loans.
BoR reduces interest rates on education loan under ``Shiksha Sarathi`` scheme
Bank of Rajasthan a private sector bank with customer friendly environment with updated technology, has reduced interest rates on education loan under ``Shiksha Sarathi`` scheme.
The bank has revised rates from 13% p.a. to 12% p.a. for fresh loans irrespective of quantum of loan. At present the education loan is being offered at 3% below BPLR.
The new loan rate has been cut down by 100 basis points. Thus this move will be beneficial for student community across the country who believes that lower interest rates on education loans will be helpful for them in pursuing professional courses.
The bank has revised rates from 13% p.a. to 12% p.a. for fresh loans irrespective of quantum of loan. At present the education loan is being offered at 3% below BPLR.
The new loan rate has been cut down by 100 basis points. Thus this move will be beneficial for student community across the country who believes that lower interest rates on education loans will be helpful for them in pursuing professional courses.
Eligibility norms for educational loans for Virudhunagar students modified
The eligibility norms to avail educational loans for students of Virudhunagar have been modified. Under the revised norms the students who have not been able to pass Plus Two examinations in first attempt will also be eligible to take the loans.
Virudhunagar MP B. Manicka Tagore told that the existing criteria that students must score a minimum of 70 per cent marks in the qualifying examination to get loan, has been removed. He added besides this the banks were not permitted to give loans to students who are not residing within their service area.
On October 19 MP has planned an educational loan mela at the V.V.V. College for Women for the students of Virudhunagar parliamentary constituency and Virudhunagar district.
He added, “All nationalized banks are participating in the mela. We are expecting at least 5,000 students and all eligible candidates will get the loans”.
Students who are pursuing professional courses can take loan. He said Union Home Minister P. Chidambaram will be distributing loan orders. The mela will be sponsored by two lead banks - Indian Overseas Bank (Virudhunagar district) and Canara Bank (Madurai district).
The maximum loan amount of Rs. 10 lakh will be given for studies within the country and Rs. 20 lakh for abroad. Mr. Tagore informed that the students do not have to give any security to get loans for up to Rs. 4 lakh. But a personal surety will be required for the loan amounts above Rs. 4 lakh and Rs. 7.5 lakh.
Virudhunagar MP B. Manicka Tagore told that the existing criteria that students must score a minimum of 70 per cent marks in the qualifying examination to get loan, has been removed. He added besides this the banks were not permitted to give loans to students who are not residing within their service area.
On October 19 MP has planned an educational loan mela at the V.V.V. College for Women for the students of Virudhunagar parliamentary constituency and Virudhunagar district.
He added, “All nationalized banks are participating in the mela. We are expecting at least 5,000 students and all eligible candidates will get the loans”.
Students who are pursuing professional courses can take loan. He said Union Home Minister P. Chidambaram will be distributing loan orders. The mela will be sponsored by two lead banks - Indian Overseas Bank (Virudhunagar district) and Canara Bank (Madurai district).
The maximum loan amount of Rs. 10 lakh will be given for studies within the country and Rs. 20 lakh for abroad. Mr. Tagore informed that the students do not have to give any security to get loans for up to Rs. 4 lakh. But a personal surety will be required for the loan amounts above Rs. 4 lakh and Rs. 7.5 lakh.
Wednesday, September 2, 2009
Education loan may be extended for non-professional courses
Aravind Limbavali minister for Higher Education at a felicitation program, organized by Karnataka Government Secretariat Co-operative Society Limited said the government is thinking of extending the educational loan scheme to non-professional courses.
Last year, BJP government had started an education loan scheme under which nationalized banks would provide loans to students who have taken admission in professional courses at an annual interest rate of 6 per cent. He informed that last year around 24,000 students availed the benefit of the scheme.
Limbavali told, “We are planning to extend the same to students who want to study degree courses.”
During the occasion 55 children, of employees working at Government Secretariat, Lokayukta, Archives and Legislature of both the Houses and who have scored high marks in SSLC and second PU were felicitated.
In his address Governor H R Bharadwaj advised employees not to indulge in any corrupt activities. He said, “If the employee is caught, his or her entire family will be humiliated”.
Last year, BJP government had started an education loan scheme under which nationalized banks would provide loans to students who have taken admission in professional courses at an annual interest rate of 6 per cent. He informed that last year around 24,000 students availed the benefit of the scheme.
Limbavali told, “We are planning to extend the same to students who want to study degree courses.”
During the occasion 55 children, of employees working at Government Secretariat, Lokayukta, Archives and Legislature of both the Houses and who have scored high marks in SSLC and second PU were felicitated.
In his address Governor H R Bharadwaj advised employees not to indulge in any corrupt activities. He said, “If the employee is caught, his or her entire family will be humiliated”.
Friday, July 31, 2009
Tax deduction benefit on education loan extended for legal guardians
On Monday Finance Minister Pranab Mukherjee announced the tax deduction benefit on interest paid on education loan for legal guardian of the student under Section 80E of the Income Tax Act.
Previously under Section 80E of the Income Tax Act, the individual who has taken the education loan was eligible for the benefit at the time of loan repayment.
According to tax experts the new ruling is a logical step. Vikas Saval, executive director, KPMG, pointed out in India children have a strong family support; in most cases parents or legal guardians support their children’s education and repay the education loans. Thus it is logical to extend the tax deduction benefit to the parents in case they are repaying the education loan of children.
Jayesh Shangvi, tax partner, Ernst & Young, said, “In many cases, if an individual taking education loan doesn’t get a job, his parents or legal guardian, being the guarantor for the loan, had to repay the loan. So, it’s a welcome move from the government.”
Shailendra Kumar, editor, of Taxindia.com, said government has taken a positive step and several lakh people will be benefited, who will be able to avail tax deduction on repayment of loans taken for their children’s education. He further added, “The government’s move to extend the benefit to legal guardian and not just parents makes Section 80E all the more beneficial”.
In the Union Budget this year, the finance minister had earlier announced the tax benefits under Section 80E to all vocational courses after SSC or equivalent.
Previously the benefits were extended to full-time graduates or post-graduate courses in medicine, engineering, or management, or post-graduate courses in applied sciences or pure sciences, including mathematics and statistics.
In the current financial year for the first two months, banks have given Rs 7,338 crore as education loan, a growth of 34 per cent over the same period last year. PSU banks are the major players in the education loan segment have disbursed Rs 27,645 crore during 2008-09.
Previously under Section 80E of the Income Tax Act, the individual who has taken the education loan was eligible for the benefit at the time of loan repayment.
According to tax experts the new ruling is a logical step. Vikas Saval, executive director, KPMG, pointed out in India children have a strong family support; in most cases parents or legal guardians support their children’s education and repay the education loans. Thus it is logical to extend the tax deduction benefit to the parents in case they are repaying the education loan of children.
Jayesh Shangvi, tax partner, Ernst & Young, said, “In many cases, if an individual taking education loan doesn’t get a job, his parents or legal guardian, being the guarantor for the loan, had to repay the loan. So, it’s a welcome move from the government.”
Shailendra Kumar, editor, of Taxindia.com, said government has taken a positive step and several lakh people will be benefited, who will be able to avail tax deduction on repayment of loans taken for their children’s education. He further added, “The government’s move to extend the benefit to legal guardian and not just parents makes Section 80E all the more beneficial”.
In the Union Budget this year, the finance minister had earlier announced the tax benefits under Section 80E to all vocational courses after SSC or equivalent.
Previously the benefits were extended to full-time graduates or post-graduate courses in medicine, engineering, or management, or post-graduate courses in applied sciences or pure sciences, including mathematics and statistics.
In the current financial year for the first two months, banks have given Rs 7,338 crore as education loan, a growth of 34 per cent over the same period last year. PSU banks are the major players in the education loan segment have disbursed Rs 27,645 crore during 2008-09.
Monday, July 27, 2009
Banks look forward good business in education loan
Geebee Education, the consultant had organized an education loan mela in Mumbai and was surprised to get calls from so many banks beyond their expectations. Earlier when they had contacted banks only eight of them had confirmed their participation, but 13 turned up which made it difficult for the organizers to arrange space for the extra ones.
However the public sector banks are the leaders in education loan business.
But in the mela only few prospective borrowers turned up. The organizers believe it is due to rain for low turn up, moreover this year there has been decline in the number of Indian student going abroad due to the global recession. Around 250-300 prospective students turned up at the mela, although organizers had expected at least 500 students.
In the loan mela there were many options available. According to one of the prospective borrower Shikha Mutreja looking for an education loan to fund a master’s program at the School of Oriental and African Studies in London, was surprised to find wide choice at the loan mela.
A senior State Bank of India (SBI) executive, who handles retail credit, pointed out, "There is no significant change in business volumes (for educational loans) this year. The domestic demand will get a fillip when the new IITs and IIMs go on stream."
Loan mela banks made a good business as educational institutions in some countries have simplified funding norms for students. In the wake of attacks on Indians very few students are interested to go to Australia, thus colleges and universities of UK and Canada have opened their doors for Indian students. Now the Canadian educational institutions are not looking at the bank balance of the student and his/her parents, but are welcoming 100 percent loans. Geebee Director Vinayak Kamat informed UK too is allowing 100 percent financing.
Even the banks have eased the norms for educational loan but students are not borrowing more than 85% of the cost if they are going abroad. Kamat informed for studying at local colleges the loan amount being borrowed is about 95% of the value of the loan. Regarding interest rates in case you take admission in an IIM banks will charge 11% a year, whereas for a second-rung B-school the interest rate will stand to 14%.
However some students have complained still many banks deny loans to fund education at lower-rung institutes in India. Bank chiefs giving clarification on their part say that the situation has improved immensely, partly because of the pressure put on by the Reserve Bank of India (RBI) and the government.
A branch manager with a medium-size public sector bank, pointed out, “Often branch-level staff are not inclined to drive this business since these are smaller in value. Instead, they prefer to deal with companies’ working capital requirements, which involve less time and effort. But we are trying to ensure a change in this attitude”.
As a matter of fact banks have started realizing that recession or no recession, education loans are a low-risk business. For education loans above a certain value, public sector banks ask for a guarantor, other than student’s immediate family member. Even for the loans above Rs 12-15 lakh, collateral is required. In case of private banks, such as HDFC Bank, the student is the first applicant, while his/her parents are the co-applicant. “Even if the student is unable to pay, our repayments are not affected,” stated a bank executive at the loan mela.
Bank executives, informed in spite of the recession, in most cases students have repaid their loans that too ahead of schedule, typically in two-three years. According to Union Bank of India Chairman and Managing Director M V Nair, “Competition has increased as banks have realized that this is a good business since the risk of default on such loans is minimal. Our educational loan book has grown annually by 40-45 per cent for the last four years”.
SBI executive informed, “While giving a loan to a student, our intent is not just to get immediate business. We look at them as clients for the long term, be it overseas or in India”, while SBI has reported a 50 per cent jump in its education loan portfolio of about Rs 6,600 crore by the end of March 2009.
Seeing an opportunity, two years ago few of private sector lenders have also jumped into the business, while foreign players, such as Citi, are concentrating on big-ticket loans. Currently the public sector lenders are more active. Their outstanding portfolio of educational loans has registered a rise by 39.51 per cent to Rs 27,645.58 crore as on March 2009 as against Rs 19,816.54 crore a year ago. Even there has been increase of 28.59 per cent to 1.6 million in FY09 in the number of students availing loans as against 1.25 million a year ago.
Most of the Indian students prefer US, Australia, the UK, Canada and New Zealand and 90 per cent of them apply for an education loan. According to consultants the education scenario is quite different in the US this season as the recession had a great impact on the job scenario and any improvement is expected only in 2011. Thus education consultants are of view that parents should put off their loan plans for few months.
One of the students Ravina Nair, who is looking to pursue a three-year hotel management course in the UK said, “By the time I complete my education, things would have changed. Besides, it depends on the student”. “I have spoken to my friends in the UK. Not only have they found jobs, but they are also looking to pre-pay their loans,” added Suhail Kazi. Besides, a Canara Bank executive informed that banks, especially public lenders, are giving relaxation and restructuring loans.
He stated, “While it is up to the branch manager to decide, we are giving more time to those who have not found jobs and are, therefore, finding it difficult to repay”. “It (the recession) could work in two ways. Some may think to study for two years and by the time they complete their courses, the economic environment could improve. And, some others may postpone their plans for overseas education as a cautious response to the uncertain economic climate,” stated Union Bank’s Nair.
However the public sector banks are the leaders in education loan business.
But in the mela only few prospective borrowers turned up. The organizers believe it is due to rain for low turn up, moreover this year there has been decline in the number of Indian student going abroad due to the global recession. Around 250-300 prospective students turned up at the mela, although organizers had expected at least 500 students.
In the loan mela there were many options available. According to one of the prospective borrower Shikha Mutreja looking for an education loan to fund a master’s program at the School of Oriental and African Studies in London, was surprised to find wide choice at the loan mela.
A senior State Bank of India (SBI) executive, who handles retail credit, pointed out, "There is no significant change in business volumes (for educational loans) this year. The domestic demand will get a fillip when the new IITs and IIMs go on stream."
Loan mela banks made a good business as educational institutions in some countries have simplified funding norms for students. In the wake of attacks on Indians very few students are interested to go to Australia, thus colleges and universities of UK and Canada have opened their doors for Indian students. Now the Canadian educational institutions are not looking at the bank balance of the student and his/her parents, but are welcoming 100 percent loans. Geebee Director Vinayak Kamat informed UK too is allowing 100 percent financing.
Even the banks have eased the norms for educational loan but students are not borrowing more than 85% of the cost if they are going abroad. Kamat informed for studying at local colleges the loan amount being borrowed is about 95% of the value of the loan. Regarding interest rates in case you take admission in an IIM banks will charge 11% a year, whereas for a second-rung B-school the interest rate will stand to 14%.
However some students have complained still many banks deny loans to fund education at lower-rung institutes in India. Bank chiefs giving clarification on their part say that the situation has improved immensely, partly because of the pressure put on by the Reserve Bank of India (RBI) and the government.
A branch manager with a medium-size public sector bank, pointed out, “Often branch-level staff are not inclined to drive this business since these are smaller in value. Instead, they prefer to deal with companies’ working capital requirements, which involve less time and effort. But we are trying to ensure a change in this attitude”.
As a matter of fact banks have started realizing that recession or no recession, education loans are a low-risk business. For education loans above a certain value, public sector banks ask for a guarantor, other than student’s immediate family member. Even for the loans above Rs 12-15 lakh, collateral is required. In case of private banks, such as HDFC Bank, the student is the first applicant, while his/her parents are the co-applicant. “Even if the student is unable to pay, our repayments are not affected,” stated a bank executive at the loan mela.
Bank executives, informed in spite of the recession, in most cases students have repaid their loans that too ahead of schedule, typically in two-three years. According to Union Bank of India Chairman and Managing Director M V Nair, “Competition has increased as banks have realized that this is a good business since the risk of default on such loans is minimal. Our educational loan book has grown annually by 40-45 per cent for the last four years”.
SBI executive informed, “While giving a loan to a student, our intent is not just to get immediate business. We look at them as clients for the long term, be it overseas or in India”, while SBI has reported a 50 per cent jump in its education loan portfolio of about Rs 6,600 crore by the end of March 2009.
Seeing an opportunity, two years ago few of private sector lenders have also jumped into the business, while foreign players, such as Citi, are concentrating on big-ticket loans. Currently the public sector lenders are more active. Their outstanding portfolio of educational loans has registered a rise by 39.51 per cent to Rs 27,645.58 crore as on March 2009 as against Rs 19,816.54 crore a year ago. Even there has been increase of 28.59 per cent to 1.6 million in FY09 in the number of students availing loans as against 1.25 million a year ago.
Most of the Indian students prefer US, Australia, the UK, Canada and New Zealand and 90 per cent of them apply for an education loan. According to consultants the education scenario is quite different in the US this season as the recession had a great impact on the job scenario and any improvement is expected only in 2011. Thus education consultants are of view that parents should put off their loan plans for few months.
One of the students Ravina Nair, who is looking to pursue a three-year hotel management course in the UK said, “By the time I complete my education, things would have changed. Besides, it depends on the student”. “I have spoken to my friends in the UK. Not only have they found jobs, but they are also looking to pre-pay their loans,” added Suhail Kazi. Besides, a Canara Bank executive informed that banks, especially public lenders, are giving relaxation and restructuring loans.
He stated, “While it is up to the branch manager to decide, we are giving more time to those who have not found jobs and are, therefore, finding it difficult to repay”. “It (the recession) could work in two ways. Some may think to study for two years and by the time they complete their courses, the economic environment could improve. And, some others may postpone their plans for overseas education as a cautious response to the uncertain economic climate,” stated Union Bank’s Nair.
Monday, July 13, 2009
PE investors plans to increase investment in education sector
The budget presented by finance minister failed to boost stock market but his proposals on education sector have raised the expectations of increase of private equity investment.
In the budget series of measures have been proposed like educational loan interest subsidy, scholarship for college and university students, national mission in education through information and communication technology and Rashtriya Madhyamik Shiksha Abhiyan.
Rajesh Singhal, Managing Partner – Private Equity, Milestone Capital Advisors stated, “The budget proposals are for enabling private participation in education where private players can play a significant role in expanding the sector. The FM tried to bring transparency and clarity into regulatory framework in education.”
Milestone seems to be interested in investing in private companies which have interest in schools, higher education and vocational training as well as in tutorials having wide presence. For them, the company has set an average investment ticket size of Rs 50-60 crore with 2-3 years time period.
Approximately, PE investment in Indian education at present is $350 million. This is expected to grow by 20-30 per cent. This will also help in generating employment in this sector. There are expectations that the private sector spending might grow at CAGR of 15 per cent to $80 billion in 2012.
According to Sunil Shirole, Managing Director & CEO, YEN Management Consultant, who is currently mediating with 10-12 domestic PE investors to strike deals in education sector, “The budget proposals have definitely improved the sentiment among domestic PE investors who will now be closely looking for its proper execution. However, a mention about FDI in education sector would have made budget proposal much better”.
The ticket size of these deals will vary from $5 million to $100 million. The investment will probably be made through special purpose vehicles (SPVs), formed by the PE investor and educational trust. The SPV might later opt for public issue once business grows.
As per industry sources, the educational loan interest subsidy scheme will persuade educational trusts to associate themselves with private limited companies in order to attract PE investments for expansion. At present, PE investors are not able to invest in educational trust due to tax complications.
An official working with a financial advisory arm of a big 4 accounting firm informed, “Mostly vocational and non-technical educational trusts will go for forming strategic alliances with private limited companies to woo PE investors to support their future expansion plans. There is huge potential for investment in this field”.
In the budget series of measures have been proposed like educational loan interest subsidy, scholarship for college and university students, national mission in education through information and communication technology and Rashtriya Madhyamik Shiksha Abhiyan.
Rajesh Singhal, Managing Partner – Private Equity, Milestone Capital Advisors stated, “The budget proposals are for enabling private participation in education where private players can play a significant role in expanding the sector. The FM tried to bring transparency and clarity into regulatory framework in education.”
Milestone seems to be interested in investing in private companies which have interest in schools, higher education and vocational training as well as in tutorials having wide presence. For them, the company has set an average investment ticket size of Rs 50-60 crore with 2-3 years time period.
Approximately, PE investment in Indian education at present is $350 million. This is expected to grow by 20-30 per cent. This will also help in generating employment in this sector. There are expectations that the private sector spending might grow at CAGR of 15 per cent to $80 billion in 2012.
According to Sunil Shirole, Managing Director & CEO, YEN Management Consultant, who is currently mediating with 10-12 domestic PE investors to strike deals in education sector, “The budget proposals have definitely improved the sentiment among domestic PE investors who will now be closely looking for its proper execution. However, a mention about FDI in education sector would have made budget proposal much better”.
The ticket size of these deals will vary from $5 million to $100 million. The investment will probably be made through special purpose vehicles (SPVs), formed by the PE investor and educational trust. The SPV might later opt for public issue once business grows.
As per industry sources, the educational loan interest subsidy scheme will persuade educational trusts to associate themselves with private limited companies in order to attract PE investments for expansion. At present, PE investors are not able to invest in educational trust due to tax complications.
An official working with a financial advisory arm of a big 4 accounting firm informed, “Mostly vocational and non-technical educational trusts will go for forming strategic alliances with private limited companies to woo PE investors to support their future expansion plans. There is huge potential for investment in this field”.
Tuesday, July 7, 2009
Students, parents welcome new scheme announced in budget
In the Union budget of 2009 FM Pranab Mukherjee has announced a new scheme called ‘Interest Subsidy on Education Loans' which has brought smile on the faces of students who are seeking educational loans. Under this scheme there will be no interest on loan for higher studies.
In this scheme the entire interest amount on the loan taken by the student will be financed by the ministry of human resource development (HRD). Earlier till the students had not completed their studies bank they were not required paying interest on the loan taken from banks.
The scheme will be applicable for students who will take loans from public sector banks for pursuing professional and vocational courses. But, there is confusion whether the scheme will be applicable to all private recognized finance institutions.
However the scheme has been welcomed by students and parents' as they believe this will help in boosting education among the needy students. Bhupendra Shekhawat, spokesperson, Rajasthan University, and a father of 15-year-old daughter said, "This would encourage parents to send their kids for higher studies".
The finance minister has also announced full interest subvention in the loan amount to the students who take admission in institutions approved by banks. According to experts this provision has its limitation, as the premier institutions like IIMs and IITs have been approved by the private sector banks due to their high repayment ability.
According to Industry experts from this scheme thousands of students across the country, will get benefited, especially the poor. According to academicians, this scheme has been launched at the right time as the admission for new session is going on and the premier institutions have raised fees for professional courses.
Kamala Poddar, director, Kamla Poddar Institutes pointed out, "It is a welcome news for the students aspiring to pursue higher studies in professional courses. It would also improve the quality of education being given in professional and vocational institutes."
In this scheme the entire interest amount on the loan taken by the student will be financed by the ministry of human resource development (HRD). Earlier till the students had not completed their studies bank they were not required paying interest on the loan taken from banks.
The scheme will be applicable for students who will take loans from public sector banks for pursuing professional and vocational courses. But, there is confusion whether the scheme will be applicable to all private recognized finance institutions.
However the scheme has been welcomed by students and parents' as they believe this will help in boosting education among the needy students. Bhupendra Shekhawat, spokesperson, Rajasthan University, and a father of 15-year-old daughter said, "This would encourage parents to send their kids for higher studies".
The finance minister has also announced full interest subvention in the loan amount to the students who take admission in institutions approved by banks. According to experts this provision has its limitation, as the premier institutions like IIMs and IITs have been approved by the private sector banks due to their high repayment ability.
According to Industry experts from this scheme thousands of students across the country, will get benefited, especially the poor. According to academicians, this scheme has been launched at the right time as the admission for new session is going on and the premier institutions have raised fees for professional courses.
Kamala Poddar, director, Kamla Poddar Institutes pointed out, "It is a welcome news for the students aspiring to pursue higher studies in professional courses. It would also improve the quality of education being given in professional and vocational institutes."
Thursday, July 2, 2009
PSU banks register 39.51 per cent growth in education loans
In 2008-2009 public sector banks (PSU) banks have registered 39.51 per cent growth in education loans a mark higher than 38.75 per cent recorded in previous financial year. At the end of March the total outstanding education loans of PSU banks amounted to Rs 27,646 crore in 1,603,385 accounts. Maximum distribution of education loan was figured out from State Bank of India, Canara Bank, Indian Bank and Punjab National Bank.
However the UCO bank a Kolkata based bank registered a 45 per cent growth in its education loan amounted at Rs 28,293 in 2008-09, it is the highest growth among all PSU banks. While State Bank of Bikaner and Jaipur witnessed a 53.5 per cent growth in its education loan amount at Rs 286.8 crore in 2008-09 against Rs 186.8 crore a year ago.
Students can take loans up to Rs 1,000,000 for studies in India and Rs 2,000,000 for studies abroad. It is observed there has been increase in education loans due to the introduction of online system for processing loan applications within stipulated time and passing on sanction to the student to approach the concerned branch.
This has been possible as last year the finance ministry had told banks that no educational loan application should be rejected or passed on to another bank/branch on the ground of area of operation, and told them to process the applications as long as it pertains to the same district. Also the banks were instructed not to put any age restriction on applicants of education loan.
In February, the Indian Banks’ Association had instructed banks to give at least 0.5 per cent rebate in interest rates to female students for pursuing higher education.
In the past four years there has been significant growth in educational loans, but are still lacking behind in comparison to other countries. According to figures only three per cent of the enrolled students in India avail education loans as compared to 85 per cent in the UK, 77 per cent in Australia and 50 per cent each in Canada and the US.
However the UCO bank a Kolkata based bank registered a 45 per cent growth in its education loan amounted at Rs 28,293 in 2008-09, it is the highest growth among all PSU banks. While State Bank of Bikaner and Jaipur witnessed a 53.5 per cent growth in its education loan amount at Rs 286.8 crore in 2008-09 against Rs 186.8 crore a year ago.
Students can take loans up to Rs 1,000,000 for studies in India and Rs 2,000,000 for studies abroad. It is observed there has been increase in education loans due to the introduction of online system for processing loan applications within stipulated time and passing on sanction to the student to approach the concerned branch.
This has been possible as last year the finance ministry had told banks that no educational loan application should be rejected or passed on to another bank/branch on the ground of area of operation, and told them to process the applications as long as it pertains to the same district. Also the banks were instructed not to put any age restriction on applicants of education loan.
In February, the Indian Banks’ Association had instructed banks to give at least 0.5 per cent rebate in interest rates to female students for pursuing higher education.
In the past four years there has been significant growth in educational loans, but are still lacking behind in comparison to other countries. According to figures only three per cent of the enrolled students in India avail education loans as compared to 85 per cent in the UK, 77 per cent in Australia and 50 per cent each in Canada and the US.
Monday, June 22, 2009
Education loan an effective option to meet higher education expenses
The cost of education has increased especially of the higher education. In this situation for students the education loan is the effective option to meet the expenses of their studies.
The admissions are going on in the colleges thus not only the IIT aspirants, the students taking admission in professional courses are also seeking for the educational loans.
One of the student Ananya Chatterjee who has applied for an education loan from ICICI bank said, "Professional education is getting more expensive with each passing year, but this doesn't mean that one has to compromise with his/her career. So, it is important to apply for bank loans if you're certain that you will get a secure job after finishing your education". She desires to do MBA from a leading institution in the country.
Like Ananya there are thousands of other students who are applying for educational loans this summer. Silky Mehra, working in the education loan department of a private bank stated, "The number of applicants for the loan is increasing every year and banks are reaping the maximum benefits of this new trend". She added, "This trend has picked up over the last seven-eight years."
Madhur Tewari, currently working with an organization in Pune, dealing in Consultancy Services told, "This loan went a long way in making me realize my responsibilities. I did not have to depend on my family to fund my education."
"Mostly the middle class salaried section of the population asks for these loans for their wards," says a senior officer of Punjab National Bank.
It has been observed that management and technical education like engineering and medicine have remained the major areas where banks are ready to give loans. Arvind Varshney, a senior official in a commercial bank pointed out, "Students going for engineering or medical come with the applications for the funding. Banks provide loans to the students who have a proven academic record and are likely to get campus placements".
Although in recent years, the demand for loans for MBA course has increased. According to Varshney, "This is an emerging field and is definitely providing good jobs to students".
Meanwhile banks are trying their best to attract students. A senior bank official said, "The bank is providing loans to the students on lesser interest rates. Further, we do not demand any personal security from the students".
Gupta points out, "Further, if the interest is serviced during the study period by the parents, students will get one per cent concession on interest rates". He added that their loan amount not only includes tuition and hostel fees, but a host of other things. He stated, "Students can buy a computer with the loan amount if it is necessary".
It is to be noted that education loan sanction schemes are showing one of the highest rates of growth among all loan segments.
The admissions are going on in the colleges thus not only the IIT aspirants, the students taking admission in professional courses are also seeking for the educational loans.
One of the student Ananya Chatterjee who has applied for an education loan from ICICI bank said, "Professional education is getting more expensive with each passing year, but this doesn't mean that one has to compromise with his/her career. So, it is important to apply for bank loans if you're certain that you will get a secure job after finishing your education". She desires to do MBA from a leading institution in the country.
Like Ananya there are thousands of other students who are applying for educational loans this summer. Silky Mehra, working in the education loan department of a private bank stated, "The number of applicants for the loan is increasing every year and banks are reaping the maximum benefits of this new trend". She added, "This trend has picked up over the last seven-eight years."
Madhur Tewari, currently working with an organization in Pune, dealing in Consultancy Services told, "This loan went a long way in making me realize my responsibilities. I did not have to depend on my family to fund my education."
"Mostly the middle class salaried section of the population asks for these loans for their wards," says a senior officer of Punjab National Bank.
It has been observed that management and technical education like engineering and medicine have remained the major areas where banks are ready to give loans. Arvind Varshney, a senior official in a commercial bank pointed out, "Students going for engineering or medical come with the applications for the funding. Banks provide loans to the students who have a proven academic record and are likely to get campus placements".
Although in recent years, the demand for loans for MBA course has increased. According to Varshney, "This is an emerging field and is definitely providing good jobs to students".
Meanwhile banks are trying their best to attract students. A senior bank official said, "The bank is providing loans to the students on lesser interest rates. Further, we do not demand any personal security from the students".
Gupta points out, "Further, if the interest is serviced during the study period by the parents, students will get one per cent concession on interest rates". He added that their loan amount not only includes tuition and hostel fees, but a host of other things. He stated, "Students can buy a computer with the loan amount if it is necessary".
It is to be noted that education loan sanction schemes are showing one of the highest rates of growth among all loan segments.
Wednesday, May 13, 2009
SBI reduced education loan rates by 25-200 bps for new borrowers
Finally State Bank of India (SBI), the country’s largest lender has taken action on its plan of reducing interest rates on education loan. SBI has reduced interest rates on education loans for new borrowers. Bank has reduced the rates in the range of 25-200 basis points (1 bp=1/100th of a percentage point). The new rates will be applicable from May 1 to September. Hence after the cut the education loans will be available in the range of 11-11.5%.
Thus on loans up to 4 lakh the rate will be 11.50% against the earlier 11.75%, on loans between Rs 4 lakh and Rs 7.5 lakh the interest charged will be 11.25% against 13.25% earlier, whereas for the loans above Rs 7.5 lakh the interest rate will be 11% against 12.25%.
For female students availing educational loan SBI offers concessional rate of 0.5%. SBI’s educational loan portfolio amounts in the range of Rs 5,000-6,000 crore.
As the new rates are applicable for the new borrowers so the existing customers will not get the benefit of the new rates as the rates they are paying are linked to SBI’s prime lending rate. And the PLR has not been reduced since January last year. The bank’s PLR is at 12.25% even though this year most banks have reduced their PLRs.
Punjab National Bank, PSU lender is offering 11% on education loans below Rs 4 lakh, and 11.75% on loans above Rs 4 lakh another lender Bank of India is charging 10% on loans up to Rs 4 lakh and 10.5% up to Rs 7.5 lakh.
BoI on loans above Rs 7.5 lakh, is charging 11.25%. According to Bank analysts SBI is offering education loans at sub-PLR, rather than cutting its PLR. Besides from education loans, SBI is offering home and auto loans and produce marketing loans for the agri sector at sub-PLR levels.
Thus on loans up to 4 lakh the rate will be 11.50% against the earlier 11.75%, on loans between Rs 4 lakh and Rs 7.5 lakh the interest charged will be 11.25% against 13.25% earlier, whereas for the loans above Rs 7.5 lakh the interest rate will be 11% against 12.25%.
For female students availing educational loan SBI offers concessional rate of 0.5%. SBI’s educational loan portfolio amounts in the range of Rs 5,000-6,000 crore.
As the new rates are applicable for the new borrowers so the existing customers will not get the benefit of the new rates as the rates they are paying are linked to SBI’s prime lending rate. And the PLR has not been reduced since January last year. The bank’s PLR is at 12.25% even though this year most banks have reduced their PLRs.
Punjab National Bank, PSU lender is offering 11% on education loans below Rs 4 lakh, and 11.75% on loans above Rs 4 lakh another lender Bank of India is charging 10% on loans up to Rs 4 lakh and 10.5% up to Rs 7.5 lakh.
BoI on loans above Rs 7.5 lakh, is charging 11.25%. According to Bank analysts SBI is offering education loans at sub-PLR, rather than cutting its PLR. Besides from education loans, SBI is offering home and auto loans and produce marketing loans for the agri sector at sub-PLR levels.
Wednesday, April 29, 2009
SBI reduced education loan rates by 25-200 bps for new borrowers
Finally State Bank of India (SBI), the country’s largest lender has taken action on its plan of reducing interest rates on education loan. SBI has reduced interest rates on education loans for new borrowers. Bank has reduced the rates in the range of 25-200 basis points (1 bp=1/100th of a percentage point). The new rates will be applicable from May 1 to September. Hence after the cut the education loans will be available in the range of 11-11.5%.
Thus on loans up to 4 lakh the rate will be 11.50% against the earlier 11.75%, on loans between Rs 4 lakh and Rs 7.5 lakh the interest charged will be 11.25% against 13.25% earlier, whereas for the loans above Rs 7.5 lakh the interest rate will be 11% against 12.25%.
For female students availing educational loan SBI offers concessional rate of 0.5%. SBI’s educational loan portfolio amounts in the range of Rs 5,000-6,000 crore.
As the new rates are applicable for the new borrowers so the existing customers will not get the benefit of the new rates as the rates they are paying are linked to SBI’s prime lending rate. And the PLR has not been reduced since January last year. The bank’s PLR is at 12.25% even though this year most banks have reduced their PLRs.
Punjab National Bank, PSU lender is offering 11% on education loans below Rs 4 lakh, and 11.75% on loans above Rs 4 lakh another lender Bank of India is charging 10% on loans up to Rs 4 lakh and 10.5% up to Rs 7.5 lakh.
BoI on loans above Rs 7.5 lakh, is charging 11.25%. According to Bank analysts SBI is offering education loans at sub-PLR, rather than cutting its PLR. Besides from education loans, SBI is offering home and auto loans and produce marketing loans for the agri sector at sub-PLR levels.
Thus on loans up to 4 lakh the rate will be 11.50% against the earlier 11.75%, on loans between Rs 4 lakh and Rs 7.5 lakh the interest charged will be 11.25% against 13.25% earlier, whereas for the loans above Rs 7.5 lakh the interest rate will be 11% against 12.25%.
For female students availing educational loan SBI offers concessional rate of 0.5%. SBI’s educational loan portfolio amounts in the range of Rs 5,000-6,000 crore.
As the new rates are applicable for the new borrowers so the existing customers will not get the benefit of the new rates as the rates they are paying are linked to SBI’s prime lending rate. And the PLR has not been reduced since January last year. The bank’s PLR is at 12.25% even though this year most banks have reduced their PLRs.
Punjab National Bank, PSU lender is offering 11% on education loans below Rs 4 lakh, and 11.75% on loans above Rs 4 lakh another lender Bank of India is charging 10% on loans up to Rs 4 lakh and 10.5% up to Rs 7.5 lakh.
BoI on loans above Rs 7.5 lakh, is charging 11.25%. According to Bank analysts SBI is offering education loans at sub-PLR, rather than cutting its PLR. Besides from education loans, SBI is offering home and auto loans and produce marketing loans for the agri sector at sub-PLR levels.
Wednesday, March 4, 2009
Banks optimistic about educational loan portfolio despite economic recession
The impact of economic recession can be seen on the job market but banks senior officials say there is no impact on the educational loan portfolio of banks. Banks are positive about educational loan portfolio therefore they do not expect any slowdown or build up of non-performing assets in the segment.
According to the official figures of the Labor Bureau about five lakh people have lost their jobs in the last three months. Banks offer educational loans for the course the borrower wishes to pursue and the job prospects in the field. Banks are looking forward of registering 35-40 per cent growth in their educational loan portfolio despite the uncertainty in the job markets.
Mr T.M. Bhasin, Executive Director, United Bank of India informed, “We do not expect any defaults surfacing in this segment. People who have lost their jobs are primarily unskilled laborers in the export and gem and jewellery sectors. Banks extend educational loan only for professional courses.”
Bank of Baroda senior bank official notified that job prospects are still good in the field of engineering, management, aviation and pilot training hence there is no need to fear of loans turning bad.
Nevertheless Banks are, getting more cautious in lending in the segment. Banks are scanning the course and job prospects more carefully to check for the fresh slippages, if any, informed a senior official at a public sector bank.
By March 31, 2008, Bank of India registered 38 per cent growth in educational loan portfolio at Rs 1,000 crore against Rs 720 crore during the corresponding period in 2007. The senior official informed bank is hopeful of 40 per cent growth in its portfolio at Rs 1,400 crore as on March 31, 2009.
While United Bank’s educational loan portfolio observed a year-on-year growth of about 40 per cent. Mr Bhasin told educational loan distributed for the nine months ended December 2008 stands at Rs 322 crore, against Rs 225 crore as on March 31, 2008.
Indian Bank also recorded 32 per cent growth in the segment for nine months ended December 2008 at Rs 1,514 crore. The bank gave loan to 49,399 students during the current fiscal, up from 44,710 during last fiscal. Indian Overseas Bank has witnessed 36 per cent growth for the same period at Rs 962 crore (Rs 707 crore).
Monday, January 5, 2009
Banks reluctant on disbursing education loans
Most of the students are taking admission in engineering and management courses due to boom in the IT and service industry. But amidst this the banks are going slow in sanctioning the educational loans, which are considered priority loans and where no collateral is supposed to be furnished for loans up to Rs four lakh. In spite of an unofficial diktat issued by the government to the PSU banks for fast lending in order to revive spending in the economy.
The manager of an Indian Overseas Bank branch in the city said in this regard that bankers' are unwilling to grant loans due to a rise in incidence of defaults on educational loans. "There is going to be a sub-prime even in educational loans," he said, on condition of anonymity. He added that almost 25% of the NPAs (non-performing assets) of his branch are educational loans.
The manager referred to an instance of default by a well-to-do student. He recollected how he had visited the student's house in a posh locality two years after the loan period ended. "The boy's father simply told me that there was no way his son could repay the loan as he had not got a job yet." Interestingly, the beneficiary was at home at that time but refused to show his face to the manager. "Neither the family nor he have even paid the interest," fumes the manager.
On the other hand the finance ministry had instructed nationalized banks to lend educational loans to deserving and meritorious students but bank managers state they are not able to give educational loans to every customer including those who have an account with the bank.
Banks normally follow according to uniformity of marks obtained by students in class Xth and class XIIth examinations before giving out the loan. In normal course PSU banks give loans to meritorious students and in cases where the course as well as the institution offering the course is approved by respective agencies. "We ascertain if the student in question is capable of finishing the course and getting employed. Only then do we disburse the loan," says a senior manager from Indian Overseas Bank (IOB) who did not want to be named.
Apart from educational loans, banks have got cautioned in case of retail lending in the current conditions. "We are giving retail loans to those people who have a salary account with IOB. We are basically interested in timely repayment. Sometimes, we also look at past records of the customer before finalizing the loan," added the IOB official.
Some bank officials are of view the slowdown in retail lending is also because there is not much demand. "Customers are waiting for further fall in prices in real estate and cars. Hence there is not much demand for home and car loans at the moment," said
Some other bank officials uphold that giving of retail loans is a function of the bank's credit deposit ratio (CDR). CDR is the proportion of loan assets created by banks from deposits received. R Venkataraman, chairman and chief executive officer, Catholic Syrian Bank said, "We have a healthy CDR at the moment, so we are bullish about retail lending".
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