Comments
Education loans are set to get cheaper for meritorious students planning to pursue higher studies.
“It would be open for banks to offer differential interest rates based on rating of courses/institutions and students,” Dr K. Ramakrishnan, Chief Executive Officer, Indian Banks’ Association, said in circular on revised guidelines on educational loans sent to banks.
Rating benchmark
The rating could be taken up by banks as a tool for improving asset quality, he added.
This would mean that the rate of interest on education loans, which is around 13.25-14.5 per cent now, can come down depending on the institution, course, academic record of the applicant and his/her employability.
Banks would now fix the quantum of concession in the interest to be offered to meritorious students individually.
Mr M. Bhgavantha Rao, Managing Director, State Bank of Hyderabad, told Business Line that “if the ratings are high, the interest concession could be as low as base rate plus one per cent.” This works out to be around 11 per cent.
According to a senior official of Indian Bank, the modalities on rating and other aspects were being worked out. The guidelines also asked banks to keep admissions under management quota for all courses, including nursing, outside the scope of the scheme.
Part-time courses, research work and job-oriented specialised programmes could be considered based on merit and placement records at the banks’ discretion, IBA said.
While computing loan amount, scholarship/fee waiver available to student will also be taken into account. Tracing of students for repayment after completion of course could be done with educational institutions.
Hereafter, educational loans would be given based purely on merit, said Mr B. A. Prabhakar, Chairman and Managing Director, Andhra Bank. But there is nothing to worry as “deserving will definitely get loan,” he added.
FUND TRUST
In view of the increasing stress on the educational loan portfolio of banks, the Government is proposing to establish a Credit Guarantee Fund Trust.
This will be applicable to educational loans granted by banks up to Rs 7.5 lakh without any collateral security and third-party guarantee. “The details are being worked out,” the IBA functionary said.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.