More students in India are opting for education loans to meet the cost of higher education than ever before.
By December 2009 — the latest quarter of 2009-10 for which figures are available — banks had given Rs 35,000 crore in education loans, an increase of Rs 7,354 crore — more than 20 per cent — over the previous financial year.
Rising cost of education, easy availability of loans, and the growing ability of borrowers to repay are the reasons cited for the increase.
Banks expect education loans to grow by 40 per cent over the years.
"Our education portfolio grew over 40 per cent in 2009-10. We expect the portfolio to sustain the growth or even surpass it in the next few years," said TM Bhasin, chairman and managing director of Indian Bank.
The bank had by December given loans to 18.6 lakh students, compared with 15.27 lakh in 2008.
The expansion in the education sector has also fuelled the demand. In the last three years alone, eight new Indian Institutes of Technology (IITs), 12 central universities and seven more Indian Institutes of Management have opened.
IIM-Ahmedabad now charges Rs 13.7 lakh for its post-graduate programme. In 2007, the fee was Rs 4 lakh.
The IITs have proposed an eight-fold increase in fee from Rs 50,000 to Rs 4 lakh a year.
Self-financing private institutions account for 80 per cent of engineering and more than 50 per cent seats in medicine.
"Most of our loan disbursement is concentrated in Tamil Nadu, Andhra Pradesh and Karnataka, which have a huge share of private and government institutions," said Indian Bank's Bhasin.
Confident of getting their money back, banks are willing to lend.
"If a student completes a course there is reasonable hope that he will get a job and repay," said TY Prabhu, chairman and managing director, Oriental Bank of Commerce.