Though banks see education as a priority sector for loans, analysts fear rupee depreciation could queer the pitch.
Loans may be getting dearer for several categories of people, but students need not worry as they are still the favoured lot. Government data shows that banks have been readily doling out education loans to bail out students who have got admission overseas, but are unable to cough up the fees by themselves. Despite the banking sector witnessing a sluggish trend in disbursements, education loans by commercial banks continue to see a sharp spurt. Going forward though, analysts predict that the depreciation in the Rupee could dent the growth in education loan disbursals. “Education loans are still being considered by banks, but we are not sure for how long if the rupee continues to fall and we are left with no choice but to be more cautious in doling out loans for higher education,” said an official of a public sector bank. However, the story so far has been encouraging. The educational loans outstanding at Rs 27,709 crore by end-March 2009, increased to Rs 42,808 crore as at end-March 2011, according to RBI data. This had further surged to Rs 48,965 crore by October 2011, a 17 per cent year-on-year growth in disbursals at a time when disbursals to most other priority sectors have been largely subdued. Analysts ascribe this to efforts by the RBI to bring more students under the category of ‘education loans' by formulating policy guidelines for lending to education by the banking system. The steps introduced include classifying such loans and advances granted to individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, under ‘priority sector'. In fact, in June 2004, the scope of definition of ‘infrastructure lending' was expanded to include construction of educational institutions.
Accordingly, schools and colleges are entitled to avail bank finance for improving their infrastructure. RBI has also been liberalizing foreign exchange rules for acquiring education from institutions abroad. So students are now able to draw foreign exchange equivalent to $10,000 under the private visit quota at the time of traveling overseas to pursue a study course. The limit of $30,000 for education abroad on declaration basis was enhanced to $1,00,000 since July 17, 2003.
In addition, a student can also draw foreign exchange equivalent to $ 2,00,000 for education purposes under liberalized remittance scheme before leaving the country, before he or she gains the status of non-resident. Students can also avail loan from a bank abroad for study purposes on the basis of counter guarantee given by an Indian Bank under the approval route.
Keywords: education loans