NPA fear puts a brake on student loan

The Hindu :THIRUVANANTHAPURAM, September 15, 2013

Only 7,267 got education loans in the year ending in June 2013 — a fall of 88.55 per cent.

Intimidated by burgeoning non-performing assets (NPA), banks in Kerala have virtually put the brakes on education loan.

Statistics presented before the latest quarterly review of the State-Level Bankers’ Committee (SLBC) reveal how quickly the banks’ enthusiasm to lend to students has waned.

While 63,485 students received education loans in the State during the one-year period ending in June 2012, only 7,267 got the same in the year ending in June 2013 — a fall of 88.55 per cent.

As on June 2013, the NPA under this portfolio had reached a high level of 10.03 per cent, with an amount of Rs. 832 crore slipping into the NPA list out of a total sum of Rs. 8,297 crore outstanding under student loans.

As on June 2011, the NPA was 3.75 per cent (Rs. 221 crore out of Rs. 5,899 crore outstanding) and, as on June 2012, it was 8.3 per cent (Rs. 603 crore out of Rs.7,269 crore outstanding). Between June 2011 and June 2012, the NPA under education loan increased from Rs. 221 crore to Rs. 603 crore — the year-on-year increase being a stunning 172.85 per cent.

The number of education loan accounts under the NPA category increased from 12,790 as on June 2011 to 34,836 as on June 2012 (by 172.37 per cent year-on-year) and to 47,884 as on June 2013 (by 37.46 per cent year-on-year).

This means 47,884 youngsters who had taken education loans from banks, as on June this year, are carrying the burden of heavy indebtedness on their shoulders without having come into income to pay back their loans. And the numbers are set to increase further because the repayment schedule of nearly 70 per cent of the loan accounts is yet to begin.

The total number of students who had taken education loan — or the number of live education loan accounts with the commercial banking system — comes to 3,75,574. 

As much as 12.75 per cent of these accounts have already fallen under NPA, indicating how serious a social problem the issue of indebtedness is turning out to be among the youth. The banks that have been particularly liberal in sanctioning education loans in the Kerala, and therefore exposed to the growing threat of NPA under the head, include the State Bank of Travancore, the State Bank of India, Canara Bank, and the Union Bank of India.