Despite the falling rupee, which parents fear could crimp their ability to finance education loans, the prospects are not bleak. Costlier dollar is making it necessary for those taking out loans to expand the ticket size. At the same time, loan seekers may soon find banks more willing to fund their higher education as the government is in the final stage of completing the modalities of the Credit Guarantee Fund for education loans. The scheme was announced by Pranab Mukherjee, the then finance minister in his budget speech for 2012-13. Industry experts feel that the credit guarantee fund will provide some comfort to banks while offering the loan to students, as they will then at least have majority of their exposure covered.
Even as the scheme details are being finalised, bankers say that it will be in line with the credit guarantee scheme for the micro and small enterprises where 75 per cent of the sanctioned amount of the credit facility is provided the guarantee cover and, for which, the banks may have to pool 1 per cent of the loan amount into the guarantee trust.
A senior State Bank of India official told that the scheme for the micro, small and medium enterprises is working well and has addressed bank's concerns.
While there is enough demand for education loan, the banking system has not adequately addressed the demand within the segment and bankers feel that the credit guarantee scheme will lead to a growth in sanction of loans.
"With the guarantee, banks will be in a better position to sanction more loans," said RK Bansal, executive director, IDBI Bank.
Not enough growth in education loans
According to the data available with the Reserve Bank of India (as per the RBI monthly bulletin of July 2013), the gross credit growth over the last 12 months (May 2012 to May 2013) rose by 14.8 per cent but the growth in education loan has been 10.2 per cent and the total outstanding for education loans stood at Rs 55,200 crore as on May 31, 2013.
nnew3670ed 22 Jul, 2013
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Source: http://www.educationnews.com/2013/07/22/govt-funding-for-education-loans-to-counter-falling-rs/
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