Educational Loan

Education loans: Fin Min upset

over banks delay

 The Finance Ministry has expressed displeasure at

the public sector banks on the unnecessary delays
in disposing the education loan applications.
There are mainly three issues: adherence of
timeline, tapering growth, and high regional
disparity regarding education loan, a senior
Government official told Business Line while
adding that banks have assured for necessary
course correction.

Delay in disposing
The government also wants these banks to treble their growth
in disbursement during the current fiscal. On the issue of
timeline, draft model education loan scheme, as prescribed
by Indian Banks Association stipulates that loan applications
have to be cleared in the normal course within a period of 15
days to a month, but not exceeding the time norms given for
disposing of loan applications under priority sector lending.

Growth dips

However, there are complaints that time taken is longer than

this, the official said, adding that banks have been asked to
strictly follow the time line which they publish on their website.
In terms of growth, number of accounts dropped to 25.69 lakh
at the end of 2014-15 from 25.73 lakh.
However, outstanding amount rose to 61,967 crore from
28,256 crore reflecting a growth of 6 per cent.
Now for the current fiscal, public sector banks have been
asked to achieve 20 per cent growth in disbursement and 15
per cent growth in number of accounts.
At the same time, focus should be on institutions with good
record and also with better campus placement record.

Regional break-up

In terms of regional distribution of loan during 2014-15,

Southern region alone accounted for 53 per cent, while
shares of Central, Eastern, Western and Northern were
14, 12, 11 and 9 per cent, respectively.
The North-Eastern region has a share of one per cent.
Finance Ministry officials feel that heavy concentration in
one region alone with more loans to students in
institutions with poor employability records is
responsible for education loan turning bad or non
performing assets (NPA).
Industry sources said that against the overall NPA of
5.5-5.6 (as a percentage of total advances), bad debts
in education loan has gone up to 8-8.5 per cent.

Keeping all these in mind, the official said that banks have been
advised to ask their branches to follow the revised guidelines of
Model Educational Loan Scheme scrupulously. They have also
been asked that loans may be granted to meritorious students
under Management Quota and loans should not be rejected on the
ground of non-service area of the branch concerned. Reasons for
rejection must be conveyed to the applicant, he said.

Source :
http://www.thehindubusinessline.com/news/education/education-loansfinmin-upset-over-banks-delay/article7364146.ece

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