This year marks the third fiscal year when trends of bad loans have burdened the education sector. According to official data, the percentage of Non-Performing Assets (NPA) has risen to 9% of the outstanding by March this year.
According to the Indian Banks Association (IBA) model for education loan schemes, banks provide a 15-year repayment window while disbursing loans. This scheme also allows a 1-year moratorium on terms of repayment after the completion of one’s education. Additionally, under this scheme one has a moratorium on repayment on spells of conditions such as unemployment, underemployment, etc. This is applicable at least 2-3 times during the repayment cycle period.
In the past two years, the NPAs on education loans started to grow from 7.3 per cent in March 2016, to 7.67 per cent in the March of the following year. At this stage, it has peaked at 8.97 per cent according to the IBA database.
Out of the Rs 71,724.65 crores outstanding education loan by the end of FY17, Rs. 6,434.62 crores were comprised of the Non-Performing assets.
The last fiscal year witnessed public sector banks (PSBs) distributing approximately Rs. 13,470 crore worth of loans to around 7.86 students. 1.5 lakh aspirants from Tamil Nadu were financially accommodated last year, followed by Kerala (99,314) and Karnataka (90,630).
As a step to bring down this figure, the Finance Ministry in collaboration with the Parliament has recommended the launch of a portal where students can apply, view and track their loan application. Vidya Lakshmi Portal was launched with the aim of making the process less frustrating and make the disbursement of loans easier.