Banks are shying away from education loans, and the worry over increasing bad loans is to blame.
In the one-year period beginning May 2017, the priority sector loans of scheduled commercial banks (SCBs) fell over Rs. 2,000 crore — from Rs. 59,300 crore in May 2017 to Rs. 57,200 crore this May. The trend continues this year: the first quarter saw a 5.7 per cent fall in gross bank credit towards education loans, according to data from the Reserve Bank of India.
Under priority sector lending (PSL), individuals are disbursed education loans of up to Rs. 10 lakh for studies in India, and Rs. 20 lakh for pursuits overseas.
Interestingly, the State Bank of India has now put up hoardings advertising high-value education loans: those in excess of Rs. 1 crore.
Bad-loan woes
Some bankers attribute the decline in priority sector loans to prudent lending. “All is not well in the education loans portfolio, but we expect it to improve,” said a senior SBI executive in response to a query.
Government data showed that at the end of the third quarter of last year, SBI had Rs. 915 crore of bad loans in this segment, of a total exposure of Rs. 1,565 crore.
In January, too, SBI put up Rs. 382-crore worth of NPAs in education loans for sale to asset reconstruction companies (ARCs).
Other banks, too, are easing up on education loans. Punjab National Bank’s share of education loans as a percentage of the total retail loan portfolio was steady at 8 per cent for FY16 and FY17, but in FY18, it fell to 7.4 per cent.
The overall outstanding in educational loans fell from Rs. 69,700 crore to Rs. 69,200 crore.
A senior executive director of a public sector bank said there has been not much job creation in recent years and that students are unable to service loans due to delays in finding employment.
via Banks pare student-loan exposure – Today’s Paper – Business Line
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