Dismal track record of education loans in MP irks govt

29 Sep

The figures tell it all. Banks in Madhya Pradesh take education loan very lightly: the 47 of them operating in the central Indian state have so far disbursed merely Rs 40 crore in aid of those aspiring to study. This, when their network is a solid total of 5,613 branches (including private, regional, rural and cooperative banks) and their deposit base is an impressive Rs 156642.15 crore.

Against the 2011-12 annual credit plan to fund 60,000 students, bankers have so far sanctioned Rs 40.07 crore to 1,559 students. Of them, Rs 12.90 crore has been disbursed to girl students. Clearly, it is not just the rural housing and no-frill accounts for poor that remain utterly neglected banking areas in the state.

Together, these prompted the state government on Wednesday to lambast the bankers. The figures on education loans read so minuscule that the administration cautioned the banks of reporting the matter to the Reserve Bank of India.


Among the banks, the private ones stand worst when it comes to sanctioning education loan. In fact, many of them don’t have even a single case during the year. The case is better with regional rural banks and state-owned cooperative banks.

The state government is perturbed. “We fail to understand why the banks are not interested in education loans despite the RBI having exhorted them to improve on the matter,” says Chief Secretary Avani Vaish. “We want RBI should take up the matter seriously. We are ready to offer guarantee in the case of NPAs,” he told Business Standard after a meeting here with state-level bankers committee.

Bankers, on their part, cite reasons for the situation.

One, they note, is rising instances of non-performing assets in education loans. Also funding loans below Rs 4 lakh is a problem since it involves no collateral or guarantee, they add.

Even so, the banks sound open-minded. “We will examine the issue,” R K Dubey, executive director Central Bank of India. “We will urge all our branch chiefs to expedite more (education) loans.”

The finance ministry isn’t too please. “Banks are simply reluctant to fund students. That’s why we have a number of seats lying vacant in engineering, medical and management colleges,” claims G P Singhal, principal secretary, department of finance.

The banks that have funded no education loans during the year so far are State Bank of Hyderabad, State Bank of Mysore, IndusInd Bank, IDBI Bank, Ing Vysya Bank, Karnataka Bank, J&K Bank, Karur Vysya Bank, The South Indian Bank and Axis Bank.

The state government is now planning to ask its own regional rural banks and cooperative banks to fund education loans. In only 10 cases have private bankers disbursed education lakhs — and that too totalling only Rs 25 lakh. Regional rural banks have disbursed Rs 1 crore to 67 students. A student can get education loan up to Rs 4 lakh without guarantee, Rs 4-7 lakh with parents’ guarantee and Rs 7-20 lakh with collateral guarantee.


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