Students borrowing from banks to pursue higher studies or even vocational courses are set to get a breather as banks would extend their repayment period by a few years.
The repayment period for students would now be enhanced to 10 years, while in some cases they can even extend it to 15 years, depending on the size of the loan, a circular issued by the Indian Banks’ Association said. Earlier, students had to repay within a period of seven years.
Apart from rating students to assess their repayment capacity and thereby determining their interest rates, the finance ministry has recently directed banks to make credit for students affordable with easier terms and conditions.
Besides, the government has also advised banks to provide short-term loans ranging from Rs. 20,000 to Rs. 150,000 for vocational courses.
Finance minister P Chidambaram has asked banks to ensure that all loan applications from students must be considered. Bank officials could even be penalised for not honouring cases. He has also asked banks to increase penetration of education loans especially in the northeast and Union territories.
“We want to provide education loans to all, our branch managers are taking every step to facilitate this and help students,” said TM Bhasin, chairman and managing director, Indian Bank.
However, students need to be careful with their repayment exercise as Credit Information Bureau (India) Ltd (CIBIL), that tracks credit history and assesses credit worthiness for borrowers, said credit score of the student would be impacted in case of defaults in repayment.
“If a student defaults on the education loan, it will negatively impact her credit history and score and may impact the chances of getting a loan in the future like the dream home or the car she aspires,” said Arun Thukral, managing director, CIBIL.