High NPAs in education loan segment turn banks cautious

September 26, 2022

High defaults of about 8 per cent in the education loan portfolio have made banks cautious and go slow on the sanction of such credit. Non-performing assets (NPAs) in the education loan category including public sector banks’ (PSBs) were 7.82 per cent at the end of June quarter of the current financial year. Outstanding education loans were about ₹80,000 crore at June-end.

Cautious approach is adopted at the end of branches while sanctioning education loans due to high NPAs, a senior public sector bank official said.

As a result some genuine cases are overlooked and there are delays, the official said.

Recently, the finance ministry had called a meeting of PSBs to take stock of the education loan portfolio and cut down on delay. The ministry exhorted banks to spread awareness about the Central Sector Interest Subsidy Scheme among field formations.

The sharp increase in non-performing assets (NPA) in education loans extended by commercial banks in India in recent years is a matter of concern, as it could hamper the growth of bank credit for higher education in the country, according to an occasional paper published by RBI.

In India, around 90 per cent of education loans are disbursed by the PSBs. Private sector banks and regional rural banks (RRBs) accounted for around 7 per cent and 3 per cent of total education loan outstanding, respectively, as at end- March 2020, the paper published in June 2022 said.