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The domestic job market squeeze has started to hit the education loan portfolio of commercial banks with defaults in this priority lending segment in Uttar Pradesh registering almost 30 percent rise in the first six months (Apr-Sep) of the current fiscal 2017-18.
Against the non-performing assets (NPA) in the education loan space of UP standing at 7.63 per cent at the end of March 2017, the NPAs have already clocked 9.92 per cent during the first two quarters of 2017-18, thus soaring by almost 30 per cent.
In value terms, NPAs which stood at Rs 2.51 billion at the end of March 2017 have already notched up Rs 2.16 billion at the end of September 2017, against total education loan outstanding of Rs 21.81 billion so far.
Over the last three years, education loan NPAs have been rising consistently with bad debts in the segment standing at 4.36 per cent, 6.96 per cent and 7.63 per cent at the end of March 2015, March 2016 and March 2017 respectively.
Interestingly, while the education loan outstanding have largely remained stagnant, the level of NPAs have been increasing indicating defaults in servicing of loan by beneficiaries either due to their failure to land jobs for repayment of wilful defaults.
The NPAs during 2014-15, 2015-16 and 2016-17 stood at Rs 1.42 billion, Rs 2.25 billion and Rs 2.51 billion respectively. Likewise, the total number of distressed accounts has also increased over the last three years from 6,495 during 2014-15 to 10,721 at the end of March 2017. At the end of September 2017, the number of NPA accounts in the education loan space had already climbed to 9,520.
Pan-India, the education loan defaults reported by commercial banks had grown by over 45 per cent from March 2016 to March 2017. According to the union finance ministry’s submission in Parliament last month, education loan bad debt soared from Rs 35.36 billion at the end of March 2016 to Rs 51.92 billion at on March 31, 2017.
Acknowledging the distress, the Centre has reportedly decided to tweak the education loan scheme to better cater the needs of the students. The proposals include repayment holiday or moratorium of course period plus another year, additional moratorium during unemployment or under-employment and extension of the repayment period to 15 years to pare the equated monthly amount.