Education loan takers up 32%, but 65% students from 6 southern states

BENGALURU: The number of students who were granted education loans went up by 32% in 2017-18, after a 13% dip in 2016-17 mostly owing to the category‘s contribution to banks‘ NPA. But the fact that 65% or 5.8 lakh of the total 8.9 lakh of these students being from just six states-Karnataka, , Kerala, Andhra, and Maharashtra-indicates the skewed higher education prospects in the country.

In terms of money, there was a 20.5% increase compared to 2016-17, when it had dipped 9% from the previous year. Again, the said states account for 60% or Rs 8,891 crore of the total Rs 14,734 crore disbursed in 2017-18. The trend for the past four years shows that the said states have consistently had the most students availing loans, and thereby, consuming most of the money (see graphic).

The banks follow the model scheme put in place by the (IBA) while giving out such loans, and presently, as per the most recent revision of the scheme in 2015, provides for repayment period of up to 15 years, besides a one year moratorium for payment after completion of studies in all cases.

Experts point out that the overwhelming share of the southern states is a reflection of the quality and access to higher education these states provide compared to some of the northern states. The argument is qualified by the number of engineering and medical colleges in the region, aside of the the number of government and private higher education institutes.

Aarin Capital Partners Chairman TV Mohandas Pai, says: “The aspiration levels in South India is considerably higher compared to the rest of the country, which is why you see students from all financial backgrounds applying for all professional courses. However, not all of them managed to avail merit seats, which means they are paying to get into colleges. Also, they don‘t always get into the top institutions which makes them unemployable thus making the loans a burden.”

As of March 31, 2018, just the public sector banks (PSBs) reported 3.44 lakh accounts as NPAs, owing them Rs 6,434.6 crore. Separate government data showed the percentage of NPAs in the category touched 9% in 2017-18, compared to 7.8% the previous year.

Pai advocated for a corpus fund for scholarships to reduce not just the exposure of banks, but also the indebtedness of young human resource. “The worse thing we could do to young Indians is to make them start their careers in debt. The solution therefore, is for the government to create a corpus of about Rs 50,000 crore (60% paid by the Centre and rest by respective states) for scholarships. Again, these funds must only go to students going to pre-qualified colleges, which could be ranked by NAAC,” he said.

Among the banks, , being the largest in the country granted loans to 3.2 lakh students a sum of Rs 4,146 crore, and not surprisingly Canara bank, headquartered in Karnataka gave out the second highest amount Rs 1,952 crore to 98,400 students. While other PSBs also have decent exposure to the sector, private banks have lent very little.
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