The Hindu Business Line : Education loans: 80% goes for domestic courses

Mumbai April 15 The growing economy, skyrocketing salaries and mushrooming professional courses have made Indian students a bankable lot. Banks report that around 80 per cent of education loans sanctioned for professional courses are within the country while the rest is for overseas education.

The State Bank of India, one of the biggest players in education loans, has registered a 30 per cent growth in its education loan portfolio in 2006-07 at Rs 3,220 crore — a jump of Rs 800 crore.

Loans below Rs 4 lakh are offered at 12 per cent while those above Rs 4 lakh are priced 3.75 per cent.

"As Indian businesses are seeing significant expansion, there is tremendous demand for qualified professionals. For instance, with the entry of several air carriers the demand for trained pilots has shot up," said a senior SBI official. Around 80 per cent of SBI's loans are for domestic courses and while the bank has tie-ups with the Indian School of Business, the IITs and all the major IIMs, pilot and airhostess courses are also receiving quick loan sanctions.

For young Indians an education loan stands for independence. "I did not want to be a burden on my parents and I was confident that I could get a job and pay back the loan," said a young professional who is still repaying her loan.

ICICI Bank offers education loans only for courses within India. The bank offers a maximum loan of Rs 15 lakh at a fixed rate of 13.75 per cent (Prime Lending Rate minus 2 per cent).

"The basic objective of introducing education loans is that you enter a customer's life at an early stage. The customer remembers the bank and we earn his loyalty," said a senior ICICI bank official.

The average ticket size of a domestic education loan is Rs 2-Rs 3 lakh while that of an overseas one is Rs 10 lakh. The tenor ranges from five-10 years. Repayment usually kicks off in a year after completing the course or six months after securing a job, whichever is earlier.

"Almost 70 per cent of our education loans are for domestic courses — mainly for MBA, MBBS, Computer Engineering, hospitality and other post graduate degrees," said Mr D. Krishnamurthy, General Manager, Bank of India.

Apart from IIMs, Bank of India has tie-ups with computer training institutes like NIIT. "The advantage of a tie-up is that since the college has been approved by us the documents are processed in as quickly as two days," added Mr Krishnamurthy. The bank's education loan portfolio stands around Rs 700 crore and is growing by 20 per cent annually.

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