The Government recently rejected, and rightly so, a suggestion from an opposition party MP from Tamil Nadu that education loans be kept out of the ambit of credit information bureaus. The MP was concerned that defaults in these “small’ loans were likely to hurt students since they would become ineligible for any loans thereafter. Apart from the patently populist and political nature of the suggestion, made no doubt with an eye on the ‘youth vote’ in the forthcoming election, it is clearly reflective of the casual approach that many politicians take towards the business of repayment of loans. Without the fear that ‘irresponsibility’ has a cost attached to it, defaults will only rise among youth fed on a culture of entitlement.

As of September 30, 2017, banks had about ₹72,000 crore of education loans in their books. When banks say that on an average, about 15 per cent of their education loan portfolio is nonperforming, they are perhaps being economical with the truth. Proof of their distinct lack of enthusiasm is seen in the paltry growth rates for education loans. It grew 1 per cent last year and 6 per cent the year before. This for a product that is clearly a necessity for a country of India’s demographic profile — with a third of its population below the age of 15.

Politicians must realise that education and by extension banks — who can make it possible for a deserving young population — are key to preventing a demographic disaster. They ill-serve that cause by encouraging delinquency on the part of students and forbearance on the part of institutions. Defaulters are not going to turn into good citizens. And it is a specious argument to compare the percentage of NPAs in educational loans to that of corporates and argue that they too deserve a waiver. If you use that logic, every loan can be written off.

NS Vageesh Associate Editor

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