More than half of all education loans in South India, TN and Kerala take 38%

Modi’s home state Gujarat accounts for Rs 1,508 crore of education loans, with barely 50,000 students opting for loans.

Written by George Mathew | Mumbai | Updated: March 30, 2015 4:21 am
education loans, education bank funds, bank loans education, education bank loans, Tamil Nadu education loans, Kerala education loans, students education loan, education loan students, Tamil Nadu, Kerala, india news, nation news As many as 9.56 lakh students have taken education loans in Tamil Nadu, while Kerala had 4.03 student loan accounts as on December 2014.

Just two states, Tamil Nadu and Kerala, have accounted for nearly 40 per cent of education loans disbursed in the country so far, indicating the skew in the tapping of bank funds for education.

Banks have disbursed Rs 16,380 crore in Tamil Nadu, Rs 10,487 crore in Kerala — over 38 per cent of total disbursals, as per data prepared by the Department of Financial Services, Ministry of Finance.

According to the data, collated from states across the country, over 54 per cent of education loans have gone to applicants in south India. As of December 31, 2014, the total outstanding education loans for the country was Rs 70,475 crore.

Banks began to disburse education loans from 2000-01. These loans were pushed the most by former finance minister P Chidambaram when the UPA was in power. Populous states like UP and Bihar are way down in the borrowings list: banks could disburse only Rs 6,697 crore and Rs 3,053 crore respectively. Students in Maharashtra — another big state — have received only Rs 4,906 crore so far; Madhya Pradesh has got Rs 1,945 crore. The entire Northeast has got only Rs 736 crore.

student-loan-graph

The skew in disbursals was discussed at a review meeting called by the Finance Ministry for public sector banks recently.

Prime Minister Narendra Modi’s home state Gujarat accounts for Rs 1,508 crore of education loans, with barely 50,000 students opting for loans. “The Ministry of HRD has given a list of 1,100 A-rated institutions and universities to banks and they do not have any problem in lending to students in these institutions. They should not consider the mortgage but focus on employability,” said a top official who participated in the Ministry review meeting, which called for a correction in the trend.

As many as 9.56 lakh students have taken education loans in Tamil Nadu, while Kerala had 4.03 student loan accounts as on December 2014. Why are education loans so popular in TN and Kerala?

“The high literacy level in these states is a major reason. Another reason is the huge number of educational institutions, especially professional colleges. Most students in southern states go for higher education, and are keen on taking up jobs,” said V R Iyer, chairperson and managing director of Bank of India.

M Narendra, who recently retired as chairman and MD of Indian Overseas Bank, said, “The awareness level of people about the banking system is very high in South India. There’s a lot of information about education loans. A large number of middle-class students apply for such loans in the southern states.”

education-loan

The DFS data shows that as much as 86.8 per cent of the total outstanding education loan is with public sector banks. As on December 31, 2014, PSU banks had disbursed Rs 61,177 crore to students, while private banks provided the remaining Rs 9,298 crore. Among PSU banks, State Bank of India topped the list with loans of Rs 15,295 crore among 5.77 lakh students, followed by Canara Bank (Rs 5,371 crore).

SBI currently charges an interest of 11.75 per cent (1.75 per cent above the base rate) on normal student loans above Rs 7.50 lakh. For loans up to Rs 4 lakh, the rate is 13.50 per cent (3.50 per cent above the base rate), and for loans between Rs 4 lakh and Rs 7.50 lakh, it is 13.75 per cent.

SBI lays down that repayment must commence a year after completion of the course, or six months after securing a job, whichever is earlier. In case a second loan is availed later, the student has to repay the combined loan amount in 12 years after completion of the second course.

The DFS has set a target of Rs 74,828 crore for education loans for the fiscal ending March 2015, but bankers are not sure of meeting the target. The Ministry had asked banks to give loans to meritorious students under the management quota, and not reject applications on the ground of non-service area of the branch concerned.

According to a senior government official, banks should take into account the new budgetary announcement of Student Financial Aid Authority, which is being set up to administer and monitor scholarships and loan schemes through the Pradhan Mantri Vidya Lakshmi Karyakram. This will help banks in increasing education loans across the country, he said.

Just two states, Tamil Nadu and Kerala, have accounted for nearly 40 per cent of education loans disbursed in the country so far, indicating the skew in the tapping of bank funds for education.

Banks have disbursed Rs 16,380 crore in Tamil Nadu, Rs 10,487 crore in Kerala — over 38 per cent of total disbursals, as per data prepared by the Department of Financial Services, Ministry of Finance.

According to the data, collated from states across the country, over 54 per cent of education loans have gone to applicants in south India. As of December 31, 2014, the total outstanding education loans for the country was Rs 70,475 crore.

Banks began to disburse education loans from 2000-01. These loans were pushed the most by former finance minister P Chidambaram when the UPA was in power. Populous states like UP and Bihar are way down in the borrowings list: banks could disburse only Rs 6,697
respectively. Students in Maharashtra — another big state — have received only Rs 4,906 crore so far; Madhya Pradesh has got Rs 1,945 crore. The entire Northeast has got only Rs 736 crore.

The skew in disbursals was discussed at a review meeting called by the Finance Ministry for public sector banks recently.

Prime Minister Narendra Modi’s home state Gujarat accounts for Rs 1,508 crore of education loans, with barely 50,000 students opting for loans. “The Ministry of HRD has given a list of 1,100 A-rated institutions and universities to banks and they do not have any problem in lending to students in these institutions. They should not consider the mortgage but focus on employability,” said a top official who participated in the Ministry review meeting, which called for a correction in the trend.

As many as 9.56 lakh students have taken education loans in Tamil Nadu, while Kerala had 4.03 student loan accounts as on December 2014. Why are education loans so popular in TN and Kerala?

“The high literacy level in these states is a major reason. Another reason is the huge number of educational institutions, especially professional colleges. Most students in southern states go for higher education, and are keen on taking up jobs,” said V R Iyer, chairperson and managing director of Bank of India.

M Narendra, who recently retired as chairman and MD of Indian Overseas Bank, said, “The awareness level of people about the banking system is very high in South India. There’s a lot of information about education loans. A large number of middle-class students apply for such loans in the southern states.”

The DFS data shows that as much as 86.8 per cent of the total outstanding education loan is with public sector banks. As on December 31, 2014, PSU banks had disbursed Rs 61,177 crore to students, while private banks provided the remaining Rs 9,298 crore. Among PSU banks, State Bank of India topped the list with loans of Rs 15,295 crore among 5.77 lakh students, followed by Canara Bank (Rs 5,371 crore).

SBI currently charges an interest of 11.75 per cent (1.75 per cent above the base rate) on normal student loans above Rs 7.50 lakh. For loans up to Rs 4 lakh, the rate is 13.50 per cent (3.50 per cent above the base rate), and for loans between Rs 4 lakh and Rs 7.50 lakh, it is 13.75 per cent.

SBI lays down that repayment must commence a year after completion of the course, or six months after securing a job, whichever is earlier. In case a second loan is availed later, the student has to repay the combined loan amount in 12 years after completion of the second course.

The DFS has set a target of Rs 74,828 crore for education loans for the fiscal ending March 2015, but bankers are not sure of meeting the target. The Ministry had asked banks to give loans to meritorious students under the management quota, and not reject applications on the ground of non-service area of the branch concerned.

According to a senior government official, banks should take into account the new budgetary announcement of Student Financial Aid Authority, which is being set up to administer and monitor scholarships and loan schemes through the Pradhan Mantri Vidya Lakshmi Karyakram. This will help banks in increasing education loans across the country, he said.

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  1. M
    MR.DONALD MONEY
    Feb 26, 2016 at 6:25 am
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    Reply
  2. C
    Concerned
    Mar 30, 2015 at 9:11 am
    is there any need of PM's name in every article?
    Reply
  3. H
    Harish Kiran
    Mar 30, 2015 at 10:56 am
    Everything comes down to Education. Need to improve employability.
    Reply
  4. सुषमा
    Mar 30, 2015 at 2:05 pm
    Excellent article regarding Education Loans. PSU banks seem to be doing a great job of loan disbursal which is great. One however wonders about the recovery status. Poor recovery will certainly adversely affect the banks. Is anybody monitoring that? Perhaps you could do a follow up article on the subject.
    Reply
  5. R
    Ramanathan Subramanian
    Mar 30, 2015 at 9:46 am
    One must have the decency to accept that the scheme was brought in by the so called "communal" NDA as per media definition.It such decency is not found, such write ups or news items will also not command respect.
    Reply
  6. R
    Ramanathan Subramanian
    Mar 30, 2015 at 9:47 am
    True. Because it was his party and alliance that brought the scheme under Vajpayee.Not under the leadership of the (s)elected PM. The latter reaped the benefits especially his former Finance Minister.
    Reply
  7. V
    VIVEK
    Mar 31, 2015 at 8:22 am
    Stay away from needless loan.
    Reply
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