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.
Thursday, July 24, 2008
Wednesday, July 23, 2008
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.
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.
Monday, July 14, 2008
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.
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.
Thursday, June 12, 2008
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.
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.
Tuesday, June 10, 2008
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.”
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.”
Friday, May 23, 2008
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.
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.
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