Soon, youngsters with an entrepreneurial streak may get the backing of banks. How? Banks are considering a moratorium on repayments to education loan borrowers if they want to start a venture after graduation.

This proposal has been made in the context of the government’s push to encourage local entrepreneurs and manufacturers through the ‘Make in India’ campaign.

As per a proposal to revamp the Indian Banks’ Association’s model education loan scheme, banks could also provide a repayment moratorium to borrowers in case they lose their jobs or get into one that doesn’t pay well.

“We are witnessing economic cycles whereby an economic slowdown stretches for a longer period than an upturn. In such a scenario, job security is not guaranteed.

“A borrower, who has taken a 15-year education loan, could face unemployment spells a couple of times during the tenure of the loan. So, this needs to be taken into account in banks’ education loan schemes,” said a senior public sector bank official.

Case-to-case basis

However, this (moratorium) may be considered only on a case-to-case basis as otherwise it could open the floodgates, with education loan borrowers knocking at the door of bank branches to seek exemptions, the bank official added.

Given that there is an element of uncertainty in most jobs in the private sector, the moratorium proposal, if it gets industry-wide acceptance, could give education loan borrowers, who find themselves between jobs or want to give wings to their entrepreneurial dream, some breather.

With the slowdown in the economy and the cost of education going up, fresh campus recruits are finding it difficult to service the loan they have taken. The stress levels are severe for loans below ₹4 lakh, where neither security is taken nor margin sought.

At present, the IBA’s model education loan scheme comes with a repayment moratorium, which includes only the course period plus one year or six months after getting a job, whichever is earlier.

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