Indian banks have stepped up lending to students, betting on a post-Covid revival in higher education courses, especially overseas.
The education loan portfolios of banks rose 18.3 percent on May 19, compared with 6.1 percent growth a year earlier, according to the Reserve Bank of India.
Experts attributed the increase in education loans to rising demand for overseas and domestic offline courses after the Covid-19 pandemic.
“Overseas education loans have increased very substantially,” said Sanjay Agarwal, a senior director at CARE Ratings. “This is aided by recovery in the domestic space after the Covid phases.”
Agarwal added that there has been a tremendous increase in interest for overseas education, where loans are relatively of higher amounts.
Growth in education loans so far this financial year was 0.9 percent compared with a fall of 0.1 percent in the previous comparable period. Outstanding education loans of Indian banks stood at Rs 97,756 crore on May 19 compared with Rs 82,662 crore a year ago.
What changed?
Education institute experts said the rise in demand for education loans was due to an increase in the number of students wanting to study abroad and higher course fees after campuses overseas opened up as the pandemic retreated.
“We see this trend due to an increase in the aspirations of students wanting to study abroad,” said Vaibhav Kumar Singhal, business head of Taproot Group of Colleges. “Also, the increased cost of education and constant requirements to upskill oneself have led to borrowings.”
Singhal said there has been a surge in the number of students moving abroad, especially for undergraduate programmes, in recent years unlike earlier, when students went mainly for post-graduate courses.
The spokesperson of the Indian Institute of Management Ahmedabad said educational loans for premier institutes have been treated as priority lending by the government of India for many years and many of the institute’s students have taken such loans.
Banks offer various types of educational loans for students, with varying tenures and borrowing limits.
State Bank of India, the country's largest lender, offers SBI Student Loan Scheme, SBI Scholar Loan Scheme, and SBI Takeover Education Loans Scheme, among others.
Bank of Baroda’s offers include Baroda Digital Education Loan, Baroda Vidya, and Baroda Scholar.
The interest rates on these educational loans range from 8.50 percent to 11.75 percent, as per the websites of banks.
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