During the current financial year, the education loan disbursal target for public sector banks (PSBs) has been set at 13.5 per cent lower than the loans disbursed by all scheduled banks in FY22, reported the Indian Express (IE).
In FY22, the country’s financial system disbursed education loans for Rs 23,640 crore. For 12 PSBs, the target for FY23 has been set at Rs 20,450 crore. In India, according to IE, nearly 90 per cent of all education loans are given by PSBs.
The report added that PSBs are growing wary of small-sized loans which amount to less than Rs 7.5 lakh. This is because these loans are more vulnerable to defaults.
“Banks are wary of small ticket-size loans since there has been a large number of defaults in that segment. Defaults in bigger educational loans have not been so high,” a person aware of the matter told IE.
The Department of Financial Services also called a meeting of PSBs asking them to expedite the loan disbursal process. Several complaints have been received on the denial of loans on flimsy grounds.
“Like other sectors, the education sector has also seen an uptick in demand in terms of a larger number of students going abroad for studies and classes moving away from virtual mode. Hence, I see banks disbursing more education loans this year over last year. Banks, however, would be a little cautious in lending smaller ticket size loans since defaults are higher in that segment,” said Prakash Agarwal – director & head of Financial Institutions – India Ratings & Research, as reported by IE.
Also, PSBs have been seeing a higher default percentage in the education loan segment.