The rupee slide is putting pressure on borrowers

The depreciating rupee against the dollar has been causing anxious moments to those who have taken education loans to fund higher studies abroad. Many parents are now approaching banks, seeking either an additional loan or a rescheduling of the loan.

The rupee, which breached the Rs. 68 mark against the dollar on Wednesday, has lost 20 per cent in the last two months, putting pressure on borrowers. Even other major currencies such as the pound and the Euro were trading at Rs. 106 and Rs. 92 respectively on Wednesday. This has affected Indian student communities in the U.S. and Europe, the two major destinations for higher studies abroad.

“We have received several queries from parents and guardians on increasing the loan amount since currencies, especially dollar, have become costlier. Banks will definitely help them to tide over the problem,” said a senior official at State Bank of India, which has a big education loan portfolio. A revaluation of the security provided to the bank has to be undertaken and fresh documentation has to be done for loan top-up and that will take some time, he explained.

Earlier, he said, volatility in the dollar–rupee rate was in the 5 to 7 per cent range, but more than 25 per cent depreciation had not been seen in recent years. However, the bank has not yet received formal applications for top-up of loans, he said.

In 2012-2013, a total of Rs. 4,263 crore was disbursed as education loan by all banks for students from Karnataka. Their target for this fiscal is Rs. 5,116 crore. In 2007-2008, about Rs. 2,000 crore was disbursed as education loans in the State, which is the second-fastest growing segment for banks after the housing sector. According to him, the banks, including the SBI, are also now looking at rescheduling the term of old education loans from 7 to 12 years, which is already in place for new loans. “Parents are also anxious about the uncertainty over the depreciation. They do not know where this (depreciation) will stop, resulting in a delay in decision making,” the official said.

SyndicateBank, which offers loan under the SyndVidya scheme, has allowed respective branches to reschedule loans, if necessary, to assist the borrowers. An official, however, said they had not received any queries to increase the loan.

Meanwhile, students like Chaithra H.A. are feeling the heat. Chaithra, who is pursuing her master’s degree in Manchester, the United Kingdom, is beginning to feel the pinch. She has taken a loan of Rs. 13.5 lakh for her one-year course. “It is tough not to spend here. In a country like the U.K., where a pound is valued at over Rs. 100, it is getting extremely difficult. Everything is expensive — from food to water to transport — and there are not many part-time jobs available. It is not like we can earn back anything as getting a permanent job is tough due to visa regulations,” she said.