For the first time after four years, big-ticket education loans are witnessing an increase this year even as the priority sector education loans continue to register a steep fall for the fifth year in a row.

According to Reserve Bank of India data, education loans under non-priority sector category registered 9.4 per cent year-on-year growth this September. In the same period in 2021, education advances declined by 4.5 per cent. The declining trend is also seen in the previous years until 2018. 

“There has been a spurt in normalisation of visas and interest in higher studies abroad in the post-Covid phase leading to an uptick in demand for above ₹40 lakh education loans this year,’‘ a senior SBI official told businessline.

PRIORITY SECTOR

However, education loans under the priority sector, which are under ₹ 20 lakh as per RBI’s classification, have continued the declining trend this year as the data show the steepest dip of 11 per cent this year so far compared to 9.1 per cent decrease in previous year. 

According to the Executive Director of a Mumbai-based public sector bank, a cautious approach by banks and welfare schemes in some southern States, including Tamil Nadu and Andhra Pradesh, are among the factors for the decline in this category loans. 

“Education inflation is all time high now as domestic institutes of higher education are charging anything above ₹20,000 for a preferred course such as MBA. However, the issue is there are no high-paying jobs for students after completion of the course and the repaying capacity is a major cause of concern for us,’‘ he said. 

Not many are coming forward to provide collateral, which is required for education loans above ₹7.5 lakh, the official added. 

NPAs, a major concern

The non-performing assets (NPAs) continue to be a major concern for banks in education loan portfolio. At the end of the first quarter of FY23 ended June, NPAs stood at 7.82 per cent of a total outstanding portfolio of ₹80,000 crore. While RBI pegs the total outstanding as of September at ₹ 85,098 crore, the data on NPAs are yet to come.

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