Express press service
KOCHI: Banks in Kerala appear to be avoiding student loans – a major source of finance for students from low-income strata to pursue higher education in India and abroad – despite a drop in loan defaults.
According to the latest statistics, the total number of students who received student loans decreased by 24,257 during the quarter ended September 30, 2021, from 3,32,645 to 3,08,388 during the quarter ended September 30. June 2021. This is a quarter-on-quarter decline of 7.29%. Compared to the September 2020 period, the decline is even more marked at 56,404, or 15%, compared to 3,64,797.
Interestingly, total outstanding student loans showed a marginal increase of 4.28% in September 2021 to Rs 11,158 crore from Rs 10,700 crore in June 2021. student,” said KS Krishna, National Joint Secretary of All India Bank Employees Federation (AIBEF).
For student loans up to Rs 4 lakh, no collateral or margin is required, while for loans above this limit, the borrower is required to provide collateral, allowing banks to lend higher amounts. Compared to the prior year period, however, total outstanding student loans in Kerala fell by Rs 378 crore (3%), from Rs 11,536 crore to Rs 11,158 crore in September 2021. According to the data, out of the total outstanding student loans, Rs 5,522.05 crore (49.48%) are lent to loans of about Rs 7.5 lakh per student and Rs 1,695, 74 crore for loans of Rs 4 to 7.5 lakh. Simply put, nearly 65% of student loans are sanctioned for those who are willing to provide collateral.
Under the student loan scheme, banks can lend up to Rs 7.5 lakh for study in India and up to Rs 15 lakh for study abroad. “So the social purpose of helping students who are struggling to fund their college fees is missing in this scenario,” Krishna said. NPAs in the education lending segment fell from 10.32% in the June quarter 2021 to 9.17% in the September quarter 2021. In absolute terms, the NPA fell from Rs 1,104 crore to Rs 1 023 crore, down by Rs 81 crore quarter-on-quarter.
T Narendran, Chairman of Bank Employees Federation of India (BEFI), Kerala, said that although repayment of student loans does not start until after six months after completion of the course, or when the student gets a job , whichever comes first, the interest rate is calculated from the day the loan is sanctioned. “So it’s like a ticking time bomb for students,” he said.
For loans below Rs 4 lakh, the interest rate should not exceed Prime Rate (PLR) and for loans above Rs 4 lakh, the interest rate should not exceed PLR plus 1% . “In reality, it is much higher because the rates are calculated from the date of the sanction of the loan. Also, when the student gets a job, they may have missed one or two installments, affecting their credit score, which in turn impacts the student’s career prospects,” Narendran said.