| Public sector banks (PSBs) are increasingly focussing on the educational loans segment. Educational loan disbursement of domestic banks has zoomed 210 per cent to Rs 119.25 crore in 2004-05 compared with Rs 38.72 crore in 2003-04.
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| Number of students availing of the facility has also shot up to 9,552 from 2,881.
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| R Balakrishnan, executive director, Andhra Bank, said, “Educational loans are key to Andhra Bank as the segment helps add new and young students to the bank’s customer base — not to mention that the bad loans are quite small.”
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| SK Goel, executive director, Allahabad Bank, said the bank was also looking at this portfolio to add new customers. He too felt non-performing asset in this segment was less than one per cent.
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| A senior official said banks started focusing on this segment seriously only two years back. In an attempt to provide educational loans at a lower rate, banks tie up with educational institutions, such as Indian Institutes of Management (IIMs), Indian School of Business (ISB) and local colleges.
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| Interest rate of these loans varies between 9 and 11 per cent and depends on the amount of the educational loan availed. On an average, a student avails of Rs 3-4 lakh as loan.
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| US Bhargawa, general manager, Punjab National Bank, said the interest rate is a little higher as the student starts paying the loan only after he or she completes the education. The banks charge only a simple rate of interest and not compounded rate.
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| According to Balakrishnan, students who go for studies abroad form a large chunk of customers “thereby giving an added advantage of opening non-resident Indians account with the bank”.
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| Andhra Bank has sanctioned over Rs 250 crore in 2004-05 taking the total disbursements to Rs 780 crore. Almost Rs 550 crore was availed of by students pursuing professional courses and masters in business administration abroad.
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| Although the share of educational loan to the retail advances is just 2.84 per cent, it is a growing segment, remarks Goel.
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| “Punjab National Bank had disbursed about Rs 258.34 crore in 2004-05, an increase of 38 per cent over the last year. So far, total outstanding was Rs 483 crore,” Bhargawa added.
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| “We have been focusing on education loans since 1997-98 and we have a liberal scheme with facilities such as lower interest rate, online sanction and a collateral-free advance of up to 4 lakh,” Goel added.
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| Allahabad Bank disbursed Rs 48.55 crore during 2004-05 compared with Rs 38.95 crore in the previous year. The total outstanding was Rs 111.05 crore as on March 31, 2005.
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| Another public sector bank which has thrust on educational loans is Canara Bank. The bank charges an interest rate of 10.75 per cent up to Rs 4 lakh and above Rs 4 lakh it charges 11.75 per cent. The bank has no tie up with educational institutions. |
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