Mon. Dec 9th, 2019

Education loans: Low pay package, high interest key reasons for rise in NPAs

Lower emoluments for those entering the workforce, inability of educational institutes to churn out employment-ready candidates, and high interest rates are weighing down on the educational loan portfolio of public sector banks, thereby increasing their NPAs, according to experts.

On a stream-wise basis, nursing contributed to 21.28 per cent of the NPAs, followed by engineering at 9.76 per cent. On the other hand, medical profession and MBA contributed to 6.06 and 5.59 per cent, respectively, as on March 31, 2018.“This is because there are many colleges offering these courses, but only a few meet the standards [of quality education].

“So, banks should also do their due diligence while giving loans to students,” said Mohandas Pai, Chairman, Manipal Global Education.

He added that there is a need for banks to check the placement record of the institute before giving loans to students.

According to Indian Banks’ Association (IBA), education loans disbursed for nursing courses in 2017-18 was 2,263.74 crore. For engineering it was 3,048.79 crore and, for MBA, 1,366.30 crore.

“Our educational system lacks scientific manpower planning; there is no data on how many nurses and engineers are actually needed.

“On the other hand, students unable to repay loans is due to the low average package and high interest rate on education loans,” said Harivansh Chaturvedi, Executive President, Education Promotion Society for India. To reduce NPAs, the payment span for loan repayment must be increased from seven to 15 years, he added. Repayment received by PSBs under education loans in 2014-15 was 8,537 crore, which increased to 13,766.82 crore in 2017-18, according to PSBs.

“Quality is an issue when it comes to skilled dominant sectors such as engineering, nursing and management courses,” said Pravin Agarwala, CEO, Better Place, a digital platform that caters to the blue-collar workforce.

He added that there is a need for nurses not only in India, but also in West Asia and Japan, to name a few.

However, language proficiency and the process to find the right company overseas are some of the key challenges.

[“source-thehindubusinessline”]