Indian Banks Association Tightens Screws For Education Loans

As per a report the apex body of Banks The Indian Banks Association (IBA) will tighten the screws for Educational Loans. IBA has advised banks not to consider offering educational loans for applicants who gain admission through Management quota. The move from IBA is to help the Non Performing Assets (NPA) come down; Banks term a particular loan as NPA if the borrower’s Interest and/or installment of principal remain overdue for a period of more than 90 days.

According to the new proposal it is possible that students mayn’t get 100% loan to cover the entire tuition fee. The Banks are also advised to study each application on a case to case basis and loans are likely to favor those who have high potential of getting employed post their education. Banks will also assess the expected salary of each student depending on his or her course he is opting to join by securing the education loan.

Though the process is very much similar to the previous assessment model adopted by Banks, with a hint of advice from IBA the Banks may take the issue little more serious. What do you think?

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  1. For reducing NPAs that is not a proper process, I think selection of students as well as his / her parents ie, quality advance and quality of customer is the first criteria. If we fail to do so all accounts will be NPA within the time frame.

  2. Not considering educational loans to students who gain admissions through management quota, is not the solution for reducing NPAs in educational loans. In fact, all students who gain admissions through management quota normally will be well to do economically, and very few may not be able to earn to repay the loan availed. But they have means to repay the loans from their family income or wealth.

    In fact it is a good idea, to assess the job potential and earning prospects of a merit student of a particular discipline before sanctioning a loan to him, without a colletaral security. With increasing corporatisation of higher education, every body needs money to pursue higher education, while the job market for them may not be rosy.

    Hence IBA’s suggestion to Banks, to assess the job prospects of students applying for educational loans, will help banks in reducing future NPAs in this category.

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