MoS Finance promises to sort out problems in education loans by banks
Chennai, February 21, 2017
Minister of State for Finance Arjun Ram Meghwal assured students and banks dispensing education loans that the problems faced by both would be sorted out soonest by convening a meeting of officials of the Ministry of Finance, Education Departments and banks and NGOs concerned with the issue.
“I will convene a meeting of secretaries of finance and officials of the education ministry and also top bank officials and representatives of NGOs espousing the cause of students to hear and help resolve the problems faced," he said at a seminar organised by the ELTF, a wing of the PreSense portal, and part of the NGO Prime Point Foundation.
Mr. Meghwal said that, as a start, he would ask banks in urban areas to set up a grievances cell at their corporate office and a nodal officer in the regional centres of the banks in tier two and tier three cities to deal exclusively with the issue of education loans.
The demand for the grievances cell was made by ELTF convener and PreSense Editor K Srinivasan, who claimed that the system of dispensing and recovery of education loans needed to be streamlined so that students did not face any problems in the repayment mode. He also demanded 100% reimbursement of interest subsidy.
Mr. Subramanya Kumar, Executive Director, of Indian Overseas Bank (IOB), which has disbursed the highest amount of education loans at over Rs 3,600 crore, said there was no question of a loan waiver but the repayment system could be looked at again to make it easier for the students.
Some politicians promised students at the time of elections that education loans would be waived which was not possible in reality, he said.
While the rate of interest for education loans should be reduced, Mr. Srinivasan said, a new institution on the lines of NABARD or SIDBI should be set to provide refinance for all education loans. Also, a high level committee should be set up with all stake holders to examine the present education loan interest subsidy management.
A demand was also made to separate education loan from other loans and that the task of recovery should not be outsourced to collection agencies but done by bank officers themselves. It was pointed out that students were often threatened, muzzled and harassed by collection agencies to return the loans with unreasonable deadlines which generated tremendous pressure on the students .
Mr. Meghwal promised to look into this matter and discuss it with banks to separate education loans from the regular non-performing assets (NPA) category. Parents attending the meeting and some NGO representatives pointed out that students were future assets of the country and education loan was an investment made on them. As such, it was not right to treat their loans as an NPA.
Most of the times, students, after they passed out, found it difficult to find jobs and hence there was a delay in repayment of loans which the banks needed to understand, it was pointed out.
As per information given in the Lok Sabha recently , public sector banks disbursed education loans to the tune of Rs. 9674 crore in 2015-16 against Rs. 8312 crore in 2014-15. Private sector banks disbursed Rs. 9049 crore in 2015-16 against Rs. 7619 crore in 2014-15.
In Tamil Nadu alone, education loans disbursed by all banks amounted to Rs. 1583 crore in 2015-16 against Rs. 1952 crore. The top four banks which sanctioned maximum education loans in Tamil Nadu are:
Indian Overseas bank – 2.07 lakh accounts – amount outstanding Rs 3679 crore.
Canara Bank – 1.51 lakh accounts – amount outstanding Rs 3017 crore
Indian bank – 1.44 lakh accounts – amount outstanding Rs 2906 crore
State Bank of India – 1.01 lakh accounts – amount outstanding Rs 2351 crore.
Total 6.03 lakh accounts – amount outstanding Rs. 11, 953 crore.
According to RBI statistics released in December last year, Gross Bank Credit until December 2016 was Rs. 66,458 billion , out of which education loan amounted to Rs 608 billion which was 0.91% of the whole. In the same period last year, gross bank credit was Rs 64,335 billion, out of which education amounted to Rs. 609 billion, which was 0.94 % of the total.