Banks draw govt's ire again for neglecting study loans

While the government pushes for improving state of education through more money and new institutes, public sector banks seem to be less inclined to match efforts by giving loans to students especially for higher studies.

 

Despite much prodding, the government has met with limited success in changing their approach in giving loans. They continue to turn down applications for student loans for varying reasons.

 

Finance Minister P Chidambaram aired his frustration on banks’ attitude (towards education loans) at meeting with PSB chiefs in Delhi on March 18. He reviewed the performance of PSBs for third quarter ended December 2012.

 

Senior executive with state-owned bank said the finance minister pointed out that in spite of his repeated directions, banks continue to reject loans for education on various grounds including that the seats were in management quota. Another reasons often cited to reject study loans it is was outside the service area of banks.

 

“These are not valid grounds for rejecting loans” Chidambaram told in categorical terms in course of discussions, he said.

 

Bankers informed minister that banks had issued necessary circulars on push for educational loans. But that did not cut much ice with the finance minister. He advised banks to ensure that educational loan cases were dealt with as per the scheme and promptly.

 

Another public sector executive said banks are worried with rising defaults. This is experience in loans below Rs four lakh which are extended without any collateral.

 

According to Reserve bank of India data the portfolio of loans for education rose by 10.4 per cent (year-on-year) till January. The outstanding portfolio was Rs 54,700 crore.

 

Going by region wise analysis education loan till December 2012 southern states have highest 50 per cent share in educational loan portfolio.Tamilnadu leads the pack with loans worth Rs 13,043 crore.