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).