The Hindu Business Line : Demand for education loans on the rise in AP

Hyderabad May 2 The demand and disbursement of education loans have been growing significantly in Andhra Pradesh and leading banks are expecting the segment to grow further this year.

"The education finance is one of our top priority areas and the growth in demand has been significant over the last two years,'' Mr Amitabha Guha, Managing Director, State Bank of Hyderabad (SBH), told Business Line.

The education loan portfolio of SBH had grown 55 per cent in 2006-07 to Rs 418 crore compared to the previous fiscal. "In the current fiscal year too, we are expecting the demand to be more than doubled and are prepared to extend Rs 1,200 crore under education finance," Mr Guha said.

The same is the case with Andhra Bank. The disbursement of education loans had grown by 34 per cent during 2006-07 to Rs 905 crore from Rs 677 crore in the previous fiscal. The bank is also offering differential interest rates to make its loans more attractive.

"To benefit more students, we are offering special discount on interest rates up to 50 basis points for girl students and on prompt repayment," Mr K. Ramakrishnan, Chairman and Managing Director, Andhra Bank, said. The bank's interest rate on education finance ranges from 9.5 per cent to 11.5 per cent.

As part of its increased focus on education loans, Andhra Bank is planning to tie up with leading educational institutes in the State and country. The idea is to offer to groups of students from a particular institute so that the interest rate can be lowered further, Mr Ramakrishnan said, adding: "We will be signing memorandum of understanding with major institutes all over the country this year to provide loans to the students."

Even other banks such as Corporation Bank have been registering good business in the State in education loans. For instance, Corporation Bank's educational loans in Andhra Pradesh had nearly doubled to Rs 29 crore as on December 31, 2006 from Rs 15 crore in the comparable period previous year.

Reasons for the rise

The reasons for the increase in demand are varied. The booming job market and the high remuneration packages for graduates from reputed institutes are driving the middle class to access higher education through education loans, said Mr Guha.

According to Mr Ramkrishnan, the increased awareness about importance of higher education and the protection offered to education loans from the recent rise in the interest rates are also driving the growth in education finance, among other factors.

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