Maha ranks third in edu loans by public sector banks for foreign, domestic study

MUMBAI: The state has recorded the third highest amount of education loans granted by public sector banks (PSB) across the country.

The information presented in the Lok Sabha shows PSBS lent ₹1,472.33 crore for educational purpose to 76,854 account holders in financial year 2017-18. Maharashtra follows Tamil Nadu and Karnataka, which have topped the list of education loans and account holders availing them.

After a dip in the loan amount and the number of account holders in 2016-17, the state witnessed a 22% and 34% growth in these indicators respectively in the last fiscal. A similar trend was observed across the country, where the loan amount grew by 20% while the number of accounts increased by 31% in the past one year, following a slide during the previous years.

According to experts, the change in the lending norms of banks, rising cost of education, higher aspirations among students and the switch in the society’s tendency from saving to consumption has resulted in the increase in education loans. Amit Gainda, CEO of Avanse Financial Services, a non-banking financial company, said the education loan levels have bounced back, thanks to Indian Banks Association (IBA) changing the norms for availing education loans less than ₹4 lakh around two years ago. “The PSBS have changed their portfolios and the laws have been changed to commiserate with the performance of the portfolios,” he said.

PSBS have the lion’s share — 91.42% — in total lending by scheduled commercial banks to the education sector.

Experts also said the number of students going abroad for studies, who account for the bulk of account holders availing education loans, has increased in recent years.

Gainda estimates that every year 1.6 to 1.75 lakh students go to the United States for higher studies, while an equal number of students move to other countries.

“A few years ago, 90% of the education loans were availed for studying abroad. However, with the cost of education rising in the country, the share of loans for domestic education has increased from 20% to 25%,” he said.

Meanwhile, the proportion of non-performing assets (NPAS) in education loans at PSBS has also increased in the past two years. The information presented in the Lok Sabha shows that NPAS made up for 8.97% of the total outstanding loan amount in PSBS across the country, up from 7.67% in 2017 and 7.3% in 2016.

According to Natasha Chopra, managing director of The Chopras, an education advisory firm, more people are willing to take loans for educational purpose, even if it means some of them defaulting. “People are witnessing good returns on education and are ready to take the risk of borrowing,” she said.

“The norms for availing the loans should be lenient and the banks should lower the interest rates,” she said. “Education can decrease the disparity, but for that the government should step in,” Chopra said.