According to the recent Reserve Bank of India (RBI) report, a large part of the lending to the education sector in the country has been provided by public sector banks (PSBs). The RBI report disclosed that the PSBs provided about 91.42%.
The report shows that students in southern states like Tamil Nadu, Kerala, Karnataka, and Andhra Pradesh pursue their studies by taking education loans more than students in the rest of the country.
Banks disburse education loans under the Model Education Loan Scheme of Indian Banks’ Association (IBA). Under the scheme, interest is charged from the first year, but the interest is payable only after the moratorium period (which is the course period plus one year). However, the Government is implementing the interest subsidy schemes on education loans for higher education under the Central Sector Interest Subsidy Scheme (CSIS).
The RBI data on education loans shows that about Rs. 12,595 crore were disbursed on 684,836 loan accounts in the year 2015-16. However, the numbers came down in the year 2016-17, when Rs. 11,175 crore were disbursed on 599,729 accounts. The subsequent year, 2017-18, witnessed a rise in the numbers, as Rs. 13,470 crore were disbursed on 786,312 loan accounts.
Interest charged by the PSBs on education loans ranges from 8.60 percent to 11.50 percent per annum, depending on the Marginal Cost of Lending Rate of the respective bank and the size of the loan.
The government has advised banks to adopt a non-coercive differentiated strategy in so far as recovery of education loans is concerned. The NPAs on account of education loans in March 2018 stood at `6,434.32 crore, which is about 8.97 percent of the total NPAs of the banks.
