Banks are cautious and take their time when approving such credit because of the high default rate of roughly 8% in the portfolio of student loans. At the end of the June quarter of the current fiscal year, the percentage of non-performing assets (NPAs), which includes public sector banks (PSBs), in the category of education loans was 7.82%. About Rs80,000 crore in outstanding student loan balances as of June 30th.
Due to large NPAs, a cautious approach is taken while issuing education loans at the end of branches, according to a top public sector bank official who talked to ET.
As a result, the official claimed, some sincere instances are neglected and there are delays.
A conference of PSBs was recently summoned by the finance minister to assess the portfolio of education loans and reduce delays. The government urged banks to inform field formations about the Central Sector Interest Subsidy Scheme.
In India, the PSBs are responsible for disbursing about 90% of all student loans. According to a study published in June 2022, private sector banks and regional rural banks (RRBs) held about 7% and 3%, respectively, of the total amount of outstanding student loans as of the end of March 2020.
According to the RBI's Report on Trend and Progress of Banking in India 2020-21, there were Rs79,056 crore rupees worth of outstanding education loans held by all banks at the end of March 2020 and Rs78,823 crore at the start of March 2021. However, as of March 25, 2022, the total amount of outstanding debts rose to Rs82,723 crore.
The majority of banks provide students pursuing higher education in India and abroad with an education loan program that follows the paradigm set forth by the Indian Banks' Association (IBA).
The majority of these programs have moratorium periods that last for the length of the course plus six to twelve months, and the processing costs for programs with high-value student loans are zero or little.
Based on the standing of the program/institutions, the interest rates under the various schemes have a markup of 2—3% above the marginal cost of funds-based lending rate (MCLR)/external benchmark. The time frame for repayment is between 10 and 15 years.
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