Defaults On Education Loan Increase By 47% In 2 Years

The education loan portfolio of state-run banks has taken a hit with default increasing by as much as 47% in two years time from March 2015 to March 2017. Weak job market as well as wilful default by even those who have landed a lucrative job are prime reasons for this huge default.

The absence of any security or guarantee on such loans is a huge trigger for default which has hence risen to Rs 5,192 crore as on March 31, 2017 from Rs 3,536 crore at the end of March 2015.

For some five PSU banks, bad loans or NPAs due to the credit extended towards this category almost doubled during this period and UCO Bank and Indian bank lead the chart. The period also registered low growth in credit flow in the segment of less than 10%.

However, banks rule out any cut down on education loans. And instead put the onus on students who pursed engineering and management course by taking education loan but could not secure a good job.

Earlier to better suit the needs of students pursing education on loan, the IBA Model Education Loan Scheme has been overhauled to be less hard on NPAs as well. Several of the provisions included in the scheme include moratorium period during course period extended upto one more year or repayment holiday, moratorium extension for further time in case of under-employment or unemployment and clause to extend the repayment time to 15 years to spread the liability over a long time to reduce EMI.

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