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NewGen banks low on education loan

WITH ALL their catchy slogans and flashy claims, the contribution of new-generation banks to education in Madhya Pradesh is almost zero. On the other hand, public sector banks (PSBs) have shown commitment to social obligation with State Bank of India topping in education loan disbursement.

india Updated: Sep 12, 2006 13:39 IST

WITH ALL their catchy slogans and flashy claims, the contribution of new-generation banks to education in Madhya Pradesh is almost zero. On the other hand, public sector banks (PSBs) have shown commitment to social obligation with State Bank of India topping in education loan disbursement.

The latest State-Level Bankers’ Committee (SLBC) report on education loan disbursement in MP during 2005-06 has revealed that against nationalised banks’ Rs 128.91 crore, private banks disbursed a meagre Rs 15.71 lakh as education loan. The new generation banks scored zero on this count.

SBI tops the list having disbursed Rs 52.21 crore to 3,103 borrowers, followed by Union Bank of India, Bank of India, State Bank of Indore and PNB.

New generation private banks like ICICI, HDFC, IDBI, IndusInd, ING Vysya and UTI have not disbursed any education loan during the period.

The only three private banks to have made it to the list are Federal Bank, Bank of Rajasthan and Karur Vysya Bank with disbursement of Rs 8.85 lakh, Rs 5.86 lakh and Rs 1 lakh during 2005-06, respectively (as on March 31, 2006).

Even the unglamorous six regional rural banks (RRBs)-Budelkhand, Gwalior-Datia, Hoshangabad, Jhabua-Dhar, Mandla-Balaghat, Ratlam-Mandsaur and Rewa-Mandsaur - have disbursed education loans to the tune of Rs 54.85 lakh.

“We don’t have any education loan category. Since, non-performing assets (NPAs) are quite high with low repayment ratio, the product (education loan) is not viable for us,” argues ICICI Bank loan manager Dhitendra.

All new generation banks contended that education loan under the personal loan category is expensive compared to other loans. However, PSBs feel that since education loan is under priority sector lending, ignoring it amounts to violation of national policy.

“New generation banks don’t want to risk their money in education loan segment. It’s only the PSBs that are fulfilling the social obligation,” points out SLBC convener R P Tripathi.

“The private banks don’t want to take risk because up to Rs four lakh loan amount, there’s no provision of any security and repayment period is also too long,” points out SBI chief general manager S Bhattacharya.

“Almost all PSBs advertise schemes on education loan, but one does not get to see any such advertisements being released by these big names in new generation banks,” Tripathi taunted.