Students may not have to sweat it out for getting education loans from banks if the Reserve Bank of India (RBI) accepts the recommendations of its committee for easing approval, timely disbursement and quick recovery of these loans.

The committee, headed by Damodar Acharya, Director on RBI’s Central Board, has, among others, made out a case for banks to organise awareness camps on education loans at schools/colleges at the plus-two level and to jointly set up a central portal that will guide students and their parents on loan sanction, disbursement and recovery processes.

Further, the committee has suggested that the upper limit for with/without collateral education loans should be increased and the portal should be linked to credit information bureaus and immigration database (to help banks with recovery).

South leads The committee has suggested that sensitisation of bank officers is a necessity to make sure that student borrowers are not harassed and are helped to get education loan in time on fulfilling norms.

The southern region, comprising Andhra Pradesh, Karnataka, Lakshwadeep, Tamil Nadu, Kerala and Puducherry, accounted for a major portion of education loans in the country.

These States accounted for 62 per cent of the total number of education loans, and 55 per cent of the total amount outstanding.

As at March-end 2012, the number of education loan accounts stood at 24.81 crore aggregating Rs 48,415 crore. Education loans are mostly given by public sector banks, which account for 96 per cent of the loan accounts and 97 per cent of the total outstanding loans.

Portal The committee said all banks must agree to host a central portal that provides information on method of loan approval, processing criteria for loan approval, documentary support that is required, disbursement process, recovery process, and incentive for timely payment.

The borrower should have access to this portal to know his/her loan status, payments made and payments that are due.

Following feedback from students that too much paperwork is involved in getting an education loan and that much of it is redundant, the committee emphasised that the application form be standardised.

The institutes, according to the committee, should facilitate dispatch of education loan forms and loan application details with the offer of admission letter.

The model form has been made simple with specific endorsements from students, co-borrower, collateral security and third party guarantee provider. These endorsements will come in handy in the recovery process.

Enhance loan limit In view of the increasing costs, the RBI committee has recommended that the cap on loans without collateral should be increased to Rs 6 lakh from Rs 4 lakh now once the credit guarantee fund is in place.

For borrowers pursuing dual degree programmes of minimum five years duration, it has been suggested that the limit on loan without collateral/third-party guarantee be increased to Rs 8 lakh and for loans with collateral/third-party guarantee, to Rs 15 lakh.

The loan amount with collateral and third-party guarantee may be raised to at least Rs 15 lakh for studies in India and to Rs 30 lakh for studies abroad.

Based on the facts available, banks need not wait for verification on the ground at least for sanctioning and disbursing the first instalment.

The committee has made these suggestions as the increasing cost of higher education is making it impossible for students from middle- and lower-income groups to study in reputed institutions, both public and private.

Hence, there is a need for providing adequate and timely education loan for this section that contributes the maximum to our workforce.

ramkumar.k@thehindu.co.in

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