Volume of education loans growing fast

Volume of education loans growing fast

P. Venugopal

THIRUVANANTHAPURAM: The volume of education loans disbursed by commercial banks in the State has gone up more than 250 per cent during the last two years, throwing up certain issues that the banks want to be sorted out.

This portfolio of the banks went up from Rs.521 crore in June 2004 to Rs.1,358 crore in June 2006. As many as 1,13,290 students in the State were beneficiaries of bank finance as on June 30, this year, according to data presented at the quarterly meeting of the State Level Bankers' Committee (SLBC) held here this week.

The banks in the State account for nearly 17 per cent of the total volume of bank credit to students in the country.

The banks are, as the fast growing size of this portfolio suggests, responding positively to the Government's call to help needy students, although there may be some exceptions. No reputed bank will want to be accused of turning away a student approaching it for assistance, especially in the light of the incident involving the suicide of Rajani, an engineering student, in Thiruvananthapuram, two years ago.

All the same, they are a little wary of the possibilities of a higher than normal level of non-performing assets under this portfolio in the coming years.

The SLBC's meeting felt that the Government should put in place a credit guarantee scheme for the students on the lines of the one existing for small- scale industries. The meeting felt that such a scheme was necessary to instil further confidence in the banks in helping the students.

The forum opined that there should be some mechanism to enable the banks to keep track of the student borrowers. The Kerala SLBC raised these issues before the Indian Bankers' Association (IBA) a few months back.

A working group constituted subsequently by the IBA to study these issues suggested that the bank should be allowed to disburse education loan through its branch situated closest to the permanent residence of the student concerned.

Another suggestion was to make the parent/guardian `co-obligant.'

The recommendations of the working group, now before the Finance Ministry and the Reserve Bank of India, also touch upon the proposed Credit Guarantee Fund, the SLBC meeting was informed.