The Finance Ministry has expressed displeasure at the public sector banks on the unnecessary delays in disposing the education loan applications.

“There are mainly three issues: adherence of timeline, tapering growth, and high regional disparity regarding education loan,” a senior Government official told BusinessLine while adding that banks have assured for necessary course correction.

Delay in disposing

The government also wants these banks to treble their growth in disbursement during the current fiscal. On the issue of timeline, draft model education loan scheme, as prescribed by Indian Banks’ Association stipulates that loan applications have to be cleared in the normal course within a period of 15 days to a month, but not exceeding the time norms given for disposing of loan applications under priority sector lending.

Growth dips

However, there are complaints that time taken is longer than this, the official said, adding that banks have been asked to strictly follow the time line which they publish on their website.

In terms of growth, number of accounts dropped to 25.69 lakh at the end of 2014-15 from 25.73 lakh.

However, outstanding amount rose to ₹61,967 crore from ₹28,256 crore reflecting a growth of 6 per cent.

Now for the current fiscal, public sector banks have been asked to achieve 20 per cent growth in disbursement and 15 per cent growth in number of accounts.

At the same time, focus should be on institutions with good record and also with better campus placement record.

Regional break-up

In terms of regional distribution of loan during 2014-15, Southern region alone accounted for 53 per cent, while shares of Central, Eastern, Western and Northern were 14, 12, 11 and 9 per cent, respectively.

The North-Eastern region has a share of one per cent. Finance Ministry officials feel that heavy concentration in one region alone with more loans to students in institutions with poor employability records is responsible for education loan turning bad or non performing assets (NPA).

Industry sources said that against the overall NPA of 5.5-5.6 (as a percentage of total advances), bad debts in education loan has gone up to 8-8.5 per cent.

Keeping all these in mind, the official said that banks have been ‘advised’ to ask their branches to follow the revised guidelines of Model Educational Loan Scheme scrupulously. They have also been asked that loans may be granted to meritorious students under Management Quota and loans should not be rejected on the ground of non-service area of the branch concerned. “Reasons for rejection must be conveyed to the applicant,” he said.

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