FinMin to take up insurance cover for study loans

Urged by banks, the Union finance ministry will give attention to a scheme to insure study loans.

“The ministry will work out a note and the Indian Banks Association will then take this forward,” said a banker after a meeting yesterday between bank heads and Finance Minister Pranab Mukherjee.

At the meeting, some bank heads expressed concern on educational loans becoming the next big worry for banks. And wanted a scheme formalised to have such loans insured.

Banks that were aggressive on education loans in the past couple of years are feeling the heat now, as job market conditions yet to show signs of recovery.

A number of banks are fearing an increase in non-performing assets from these loans in the near future.

The biggest worry is loans taken by students for studying abroad. “There is a concern about whether a person taking a loan and going abroad will be traceable tomorrow. Or a person who has taken a loan without any guarantee and goes away,” said a banker.

Bankers said if they can get insurance cover for study loans, then they can improve lending to the sector.

Currently, some home loan schemes have insurance cover. The premium for such cover can be as much as Rs 25,000 a year for a Rs 15 lakh loan, bankers said.