Indian banks turn cautious about loans for Canada-bound students

The escalating diplomatic tensions between India and Canada have created uncertainty over travel and visas

Banks in India are adopting a careful approach while considering loan applications from students planning to study in Canada after a diplomatic row erupted between the two countries, senior officials told Moneycontrol.

“We are taking high caution amid the India-Canada row as these are sensitive matters. So, we have not taken any step officially on this,” said an official of a state-owned bank.

Among more than 1.3 million Indian students enrolled in 79 countries, over 180,000 – or about 14 percent – are in Canada, according to data from the external affairs ministry.

The row broke out after Canadian Prime Minister Justin Trudeau alleged that India played a role in the murder of a Khalistani terrorist. India has denied the allegation and suspended visa services for Canadians. There is speculation now that Canada might retaliate with its own measures.

“In such situations, we generally slow the process. So we may slow the loan process of students, “said a senior official of another public sector bank.

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A branch manager of a Punjab-based public sector bank told Moneycontrol that it has been extremely cautious about loans to Canada-bound applicants. People from Punjab account for a large chunk of students and immigrants headed to Canada.

"We are also waiting for some specific circular from our top management. But meanwhile we are taking cautions on our own, though parents themselves are very careful in sending their children to Canada amid tension," said the branch manager of a public sector bank.

“We don't get too many such cases... Also, it's a developing story, so we have to keep watch closely. Banks need to exercise caution,” a senior official of a private bank said.

Advisory to students

Amid the escalating tension between India and Canada in connection with the murder of Sikh separatist leader Hardeep Singh Nijjar, New Delhi issued an advisory for Indian nationals and students residing there and those planning to travel.

"In view of growing anti-India activities and politically condoned hate crimes and criminal violence in Canada, all Indian nationals there and those contemplating travel are urged to exercise utmost caution," the external affairs ministry said in a statement on September 20.

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Recently, Indian diplomats and sections of the Indian community who oppose the anti-India agenda have been the target of threats, it said. Indian nationals are therefore advised to avoid traveling to regions and potential venues in Canada that have seen such incidents, it added.

The outstanding portfolio under education loans by Indian banks grew 17 percent to Rs 96,847 crore in FY23 from Rs 82,723 crore in the previous year, according to Reserve Bank of India data.

State Bank of India is the nation’s largest education loan provider, accounting for an over 33 percent market share as of March 31. SBI’s education loan portfolio was Rs 32,133 crore in FY23, according to the bank’s annual report. It sanctioned loans of Rs 15,086 crore to students last year.