Signs of revival. Education loans register 17% growth in FY23, turning positive for first time in five years

For the first time in five years, growth in education loans not only turned positive but also registered a 17 per cent surge in the last financial year ended March, 2023. 

According to Reserve Bank of India’s (RBI) data, the outstanding portfolio under education loans grew 17 per cent at ₹96,847 crore in the year 2022-23 as against ₹82,723 crore in the previous year.

This is significant because the growth in education loans was flat during 2021-22 and it was negative for the three years prior to it. The education loans were down by 3 per cent, 3.3 per cent, and 2.5 per cent during FY21, FY20, and FY19, respectively. 

The spurt in demand especially for the big-ticket loans for studies abroad and willingness of banks to extend collateral loans are driving the growth in education advances from the last financial year, say bankers. 

”Prior to Covid, the higher Non-Performing Assets (NPAs) in education loans forced banks to be extremely cautious in the due diligence while processing loan applications which led to a negative trend in the overall portfolio. But post covid, things are looking up despite the concerns on NPAs,’‘ a senior official of a large public sector bank told businessline. 

Businessline’s enquiries with a few banks revealed that the quantum of education loans being given is still ‘very low’ and is being shown only as part of the personal loans segment and they are wary of disclosing specific figures. 

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Caution

Loans for higher education in domestic institutions are attracting greater caution from some leading banks due to ‘doubts’ about job opportunities and repaying ability after completion of the studies, reveal some applicants. ”Some of our students informed us that a leading public sector bank denied loans on the grounds of the low average salary packages after completion of the course,’‘ a functionary of a private business school said. 

The Non-Performing Assets (NPAs) in education advances stood at 7.82 per cent of a total outstanding portfolio of ₹80,000 crore at the end of the first quarter of FY23. The NPA data for the full year is yet to come. 

The priority sector educations loans slow only modest growth as they registered 0.9 per cent growth in FY 23. In the previous financial year, they decreased by 7 per cent.

The minutes of State Level Bankers’ Committee (SLBC) meetings of many a states show repeated requests to banks to step up education advances under priority sector.

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