There is good news for students wanting to study abroad.
State Bank of India has raised its limit for overseas education loans to ₹1.5 crore from ₹30 lakh earlier. It expects more demand with the government guarantee loan amount also increasing to ₹7.5 lakh from ₹ 4 lakh.
The country’s largest lender is seeing increased demand for education loans after integrating with the government’s Vidya Lakshmi portal, and has already witnessing 10% applications coming through it.
The current education loan book stands at ₹15,000 crore. “There should be a 15% increase in number of loans, and 20% increase in disbursements. Our target is to give disbursements of over ₹2,700 crore,” said Anuradha Rao, deputy MD. With the admission process just started, the bank has received over 7,700 applications since June.
Average ticket size for domestic loans is below ₹4 lakh, while for overseas loans it is ₹50-60 lakh. “In 40 days , we have received 300 applications. Most students come for engineering courses MBBS and MTech.” The only reason for a loan rejection could be not getting an admission, or not passing in the previous year.
SBI has a 23% current market share in education loans with interest rate of 2% above the base rate. At present, for loans up to ₹7.5 lakh, the interest rate is 11.15%, 2% above MCLR (marginal cost based lending rate – current method of calculation of minimum lending rate). Loans above ₹7.50 lakh charge 10.85%.
An eligible student is exempted from repayment while the student is studying, with a one-year moratorium to find a job and an additional 12-month extension on request. Simple interest is charged during the course, which is also exempted under government subsidy for students whose family income is less than ₹4.5 lakh a year.
Non-performing loans in education is 4%. However, Rao is not worried as the government takes care of 75% of the outstanding loan. The real issues are clarity to students, and inadequate database . “There is no one to clarify to the student who has any doubt while filling the application. We have suggested for a helpline on the website. It can check through a mechanism, where the students are pausing while filling the forms, which fields are left blank, etc.”
Also, we need a methodology to capture starting salaries, placement records of those who do not put data in public domain. There is no national database on quality of education, there is no rating of any institute, she added.