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Last Updated : Jul 06, 2018 12:06 PM IST | Source: Moneycontrol.com

Average size of education loans up 47% in FY18 despite fall in students seeking assistance

The average amount disbursed to an applicant climbed to Rs 9.6 lakh this year from Rs 6.8 lakh last year.

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The size of education loans rose 47 percent in FY18, despite the number of students seeking assistance decreasing, as education in India became costlier.

Banks disbursed loans worth Rs 82,600 crore in the last fiscal year, 9.25 percent more than they did in FY17, The Economic Times reported, quoting a report by credit bureau CRIF HighMark.

The average amount disbursed to an applicant climbed to Rs 9.6 lakh this year from Rs 6.8 lakh last year.

But over the same period, the number of students looking for loans declined 7 percent to 2.5 lakh, indicating that the cost of education in the country is rising.

Also read — Applying for education loan? Here's a comparative study between banks, NBFCs and P2P lenders

"Ticket sizes are going up as higher education is becoming costlier. More students are going abroad now. The fees at premier Indian institutions such as IIMs and ISB have also gone up significantly over past few years. Sourcing volume in the 20 lakh+ segment has grown by six times over the last 5 years," Parijat Garg, VP (Marketing) at CRIF HighMark, was quoted as saying.

More than half of these loans are up to Rs 4 lakh and account for 85 percent of the all education NPAs. "Loans up to Rs 2 lakh show 11.61 percent NPA," Garg was quoted as saying.

Owing to the high NPAs, bankers are now more reluctant to lend to this class of borrower. This is one of the reasons for a steep decline in volumes in this segment. Other reasons include difficulty in locating and chasing students after the completion of the course.

Also read — Keep these 7 factors in mind before availing an education loan

Public sector banks continue to dominate the education loan space, with nearly 83 percent market share. A top official from State Bank of India told the paper that both ticket sizes and volumes had been going up at the bank.

"We have nearly 30 percent market share and we don't focus on a particular segment. And we meet more than 95 percent of the disbursement targets set by the government," the official told the paper.

The official also said that the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) had been a big enabler in giving out loans as the scheme, which was launched in 2015, gives 75 percent guarantee for loans up to Rs 7.5 lakh.

Garg, however, said that awareness of such schemes is low among students.
First Published on Jul 6, 2018 12:06 pm
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