Banks record dip in education loans in Punjab

Vijay C Roy

Tribune News Service

Chandigarh, August 11

Banks in Punjab have witnessed substantial decrease in number of education loan accounts and outstanding amount during the period June 30, 2016 to June 30, 2017. Bankers in the state attributed the trend to repayment of loans by borrowers during the demonetisation period and the Indian Bank Association’s model education policy which prohibits banks to grant education loans to diploma courses offered by foreign universities.

According to the State Level Banker’s Committee data, the number of education loans as on June 2016 was 45,940 with outstanding balance of Rs 1,605.93 crore. However, as on June 2017, the total accounts were 31,750 with an outstanding amount of Rs 1,325.78 crore. Education loans are disbursed to the students at a subsidised rate of interest.

“During the demonetisation period, many of the borrowers repaid their outstanding education loan which led to decline in number of accounts as well as outstanding amount. The repayment of loan by the students clearly indicates that people had money with them but they availed the loan since it was being offered at cheaper rate of interest,” said a senior banker.

Citing other reasons, RS Sangapure, Executive Director, Punjab National Bank, said, “The Indian Banks’ Association has come out with a Model Education Policy which has laid down certain conditions for lending to students who wish to study abroad. All the banks follow the guidelines set by the IBA. In the policy, diploma courses, including PG Diploma offered by foreign universities, are not covered under the education loan which is being offered at concessional rate of interest with banks bearing the cost. However, the bank can lend to such aspiring students at a higher rate of interest.”

Senior bankers informed brisk repayment of outstanding loans, albeit in the scrapped Rs 500 and Rs 1000 currency notes, has kept the banks’ cash registers ringing since the November 8 demonetisation move. Even conservative estimates peg that there has been a phenomenal rise in outstanding loan repayments.

During the quarter ended June 2017, the banks in the state have made 2,197 education loans amounting to Rs 94.11 crore, out of which 505 loans amounting to Rs 42.86 crore have been made to female students.