Education loan kitty of NBFCs may grow 35-40% to Rs 35,000 crore in FY24: Crisil

NBFC

The education loan portfolio of non-banking financial companies (NBFCs) is likely to grow 35-40 percent in the fiscal year 2023-24 riding on specialised business models and an increase in the number of students travelling abroad, rating agency Crisil said in a report on April 20.

“Speedy loan disbursal, supported by the adequate risk classification of foreign universities both institute-wise and course-wise and structured loan repayment terms have helped these NBFCs serve the financing requirements of students travelling abroad in an optimal manner," said Krishnan Sitaraman, Senior Director and Deputy Chief Ratings Officer, Crisil Ratings.

The report highlighted that it would mark a moderation from fiscal 2023, but show a healthy growth when the assets under management (AUM) is estimated to have doubled to over Rs 25,000 crore from Rs 13,000 crore in fiscal 2022.

The Crisil report pointed out that growth had flatlined in fiscal 2021 as the Covid-19 pandemic stalled international travel.

The number of students travelling abroad dropped to a low of 2.6 lakh in the period corresponding to fiscal 2021 (more than 50 percent fall over the previous year). However, as the impact of the pandemic waned, the number rose to 4.5 lakh and further to 7.5 lakh in the periods corresponding to fiscal 2022 and 2023, respectively.

Over 90 percent of the education loans availed, of are for study abroad, with India-based courses accounting for the rest. Students pursuing academic courses in the US account for more than half of the education loan AUM of these NBFCs, followed by Canada at 20-25 percent.

Notably, the collection efficiencies for these portfolios remained stable even during fiscal 2023, despite job losses. Also, the prepayment rate for education loans is high within 4-6 years of loan disbursement on average, which comes from the salaries of the students after they get jobs.