The Hindu Business Line : Banks’ educational loan portfolio growing despite slowdown

Kolkata, Feb. 10 The economic recession and downturn in the job markets might not have a significant impact on the educational loan portfolio of banks, according to senior bank officials. Banks are not anticipating any slowdown or build up of non-performing assets in the segment.

Close to five lakh people are reported to have lost their jobs in the last three months, according to official figures revealed by the Labour Bureau. Banks usually extend educational loans based on the course the candidate wishes to pursue and the job prospects in the field. Banks are optimistic of registering 35-40 per cent growth in their educational loan portfolio despite the uncertainty in the job markets.

“We do not expect any defaults surfacing in this segment. People who have lost their jobs are primarily unskilled labourers in the export and gem and jewellery sectors. Banks extend educational loan only for professional courses,” said Mr T.M. Bhasin, Executive Director, United Bank of India.

Job prospects in areas such as engineering, management, aviation and pilot training are still good and there is no fear of loans turning bad, said a senior bank official at Bank of Baroda.

Banks are, however, planning to be more cautious in the segment and scan the course and job prospects more carefully in order to arrest fresh slippages, if any, said a senior official at a public sector bank.

Bank of India has registered 38 per cent growth in educational loan portfolio at Rs 1,000 crore as on March 31, 2008, against Rs 720 crore during the corresponding period last year. The bank anticipates 40 per cent growth in its portfolio at Rs 1,400 crore as on March 31, 2009, the senior official said.

United Bank’s educational loan portfolio has witnessed a year-on-year growth of about 40 per cent. Educational loan disbursed for the nine months ended December 2008 stands at Rs 322 crore, against Rs 225 crore as on March 31, 2008, said Mr Bhasin.

Indian Bank has also registered 32 per cent growth in the segment for nine months ended December 2008 at Rs 1,514 crore. The bank has financed 49,399 students during the current fiscal, up from 44,710 during last fiscal. Indian Overseas Bank has recorded 36 per cent growth for the same period at Rs 962 crore (Rs 707 crore).

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