The Hindu Business Line : Education loan portfolio set to grow at 40%

Kolkata, July 8 Education loan portfolio of banks, which saw a growth of about 30-40 per cent in 2007-08, is set to witness a growth of about 40 per cent in 2008-09, according to senior bank officials.

Bankers attribute the healthy growth in the portfolio to the ever-increasing demand among the younger generation and the lower number of non-performing assets.

Banks have adopted various schemes to facilitate the growth of the education loan portfolio. Apart from tying up with several institutes and offering interest rate discounts, they also accord online sanctions and ensure speedy disbursal of the loan.

State Bank of India, a major player in this field, recorded a growth of 35 per cent in educational loans and grew by Rs 1,000 crore in 2007-08, Mr P. Nandakumaran, Chief General Manager, Personal Banking, SBI, said. “We plan to sustain the growth at 35 per cent this year,” he said.

The NPAs are almost negligible usually in the range of 0.50-0.80 percent.

According to Mr V K Dhingra, Executive Director, UCO Bank, the competence of the younger generation in bagging a good job with a decent salary after the completion of their education ensures timely repayment of the loan. “The job market is also highly buoyant, so repayment is not a problem,” he said.

UCO Bank’s educational loan portfolio was at Rs 333 crore as on March 31, 2008. The bank plans to take it to Rs 476 crore in 2008-09, a growth of about 43 per cent.

Allahabad Bank has witnessed 30-per cent growth at Rs 150 crore as on March 31, 2008 and plans to expand it to Rs 300 crore in 2008-09. “Usually April--July is the best period for the sanctioning of loans and the actual disbursements begin post-July,” said a senior bank official at the bank.

The bank’s educational loan sanctions have almost doubled in the first quarter of the current financial year, against the corresponding quarter of the previous year. The average ticket size of these loans is about Rs four lakh and almost 80 per cent of it is without collaterals, said the official.

Andhra Bank has set a target to grow by 20-25 per cent this year. The current exposure is at Rs 1,800 crore. “We have tied up with a number of universities such as ICFAI, IIBM and some universities in Pune. We offer some discount on interest rate for students in these universities,” said a senior bank official.