Memorandum submitted to MOS (Finance & CA) on the Education Loan issues

An interactive Session was held with Shri Arjun Ram Meghwal, Hon'ble MOS (Finance &CA) on 17th February 2017 at Chennai to discuss the education loan issues.  Hon'ble Minister patiently listened to the grievances of all the bankers and the social workers.  He also promised to discuss all the issues at Delhi with officials and to find solutions.

ELTF subsequent to this event has submitted a detailed letter to Hon'ble Minister.  Please read the text of the letter sent by ELTf.

22 Feb 2017

Shri Arjun Ram Meghwal ji

Hon’ble Union Minister of State (Finance & Corporate Affairs)

Government of India

New Delhi

Dear Hon’ble Shri Arjun Ram Meghwal ji

Brief Report on Interactive Session with Shri Arjun Ram Meghwal, Hon’ble Union Minister of State (Finance & Corporate Affairs)

The eMagazine PreSense and Education Loan Task Force (ELTF) organised an interactive session with Shri Arjun Ram Meghwal, Hon’ble Union Minister of State (Finance & CA) on 17^th February 2017 at Clarion Hotel President, Chennai.  ELTF is one of the social initiatives of the eMagazine PreSense, and has been operating since 2010.  PreSense and ELTF thank Hon’ble Minister for sparing his valuable time and interacting with all participants.

NGOs and social workers who are active in the Education Loan concept, and senior officials from 39 Banks participated.  Prime Point Srinivasan, Editor in Chief of PreSense and Convenor of ELTF welcomed the gathering.

In his welcome address, Srinivasan outlined the difficulties faced by parents/students right from the application stage to the repayment stage of Education Loan.  The Hon’ble Minister also patiently listened to the grievances voiced by the social workers and the banks.

Shri Arjun Ram Meghwal in his address, assured that he would discuss all the issues with the bureaucrats at New Delhi and sort out all the difficulties.  He said he would also involve Education Loan activists like Prime Point Srinivasan in the meetings.  He advised all the Banks in the meantime, to nominate a Nodal Officer at Regional Offices and a Grievances Cell at Head Offices exclusively for Education Loan.

Srinivasan announced that PreSense and ELTF would institute an Award for a Bank Official and a Student for excellence in implementation and utilisation of Education Loan Scheme respectively. 

Broadly the following points emerged during the interaction session.

Application Stage

1.            Bank Branches do not attend to the students empathetically and do not guide them properly.  The students are made to run from pillar to post and the processing is unduly delayed, as against the IBA norm of 15 to 30 days.  Branches follow the Service Area Norm as against RBI guidelines.

2.            The Vidyalakshmi Portal, which was launched by the Hon’ble Finance Minister is not being implemented effectively.

3.            Branches demand guarantee and collateral security even for loans less than Rs.7.50 lakhs, which are security-free.

Interest Subsidy

4.            Although the Government of India assures full (100%) interest subsidy for the moratorium period, in practice, only 25 to 30% is being reimbursed.  The students are forced to pay the difference amount.

5.            The Interest Subsidy Scheme is available only for professional and technical courses.  The scheme should be extended to other vocation courses pursued by poor students after the 10^th standard of schooling.

6.            It is recommended that instead of the Interest Subsidy Scheme, ‘Interest Free’ Loan may be considered, to reduce the burden on poor students.

7.            Bank Branches often fail to submit their claims for interest subsidy to the Government, thus depriving especially poor students from enjoying the benefit.

8.            Interest Subsidy for foreign studies is available only for Minority students.  This should be extended to all eligible poor students, irrespective of caste and religion.

9.            Some of the Banks retain the subsidy amount with themselves and credit it to the students’ loan accounts only after a few months.  In the meanwhile, the student is compelled to pay the interest on his loan account. 

Management of Loan Accounts

10.         Several complaints are received that Branches do not provide proper information and guidance to the students.  In many cases, bank officials misguide the students due to lack of awareness.

11.         There is no communication between the branches and the students after availing the loan. 

12.         Students do not receive any communication from the Banks about the repayment schedule, after completion of their study.

13.         The rate of interest charged by the banks is high.

Non Performing Assets

14.         Banks ‘artificially’ create NPAs.  The interest subsidy portion not received from the Government is loaded on to the student borrower’s loan account and treated as NPA.

15.         Although the IBA Scheme provides for a 15-year repayment period with flexible and telescopic EMI, almost all the branches force the students to repay within 3 to 5 years.  Thus the students tend to commit default.  Within 3 months, the loan account is also classified as NPA, resulting in the students’ earning a poor credit rating.

16.         The IBA Scheme provides for a one-year moratorium period after the study period and additional moratorium of six months each, three times during the currency of the loan. None of the banks offer this concession to the needy students, thus adding the burden of the potential NPA to the students.

17.         Some of the banks like the State Bank of India are hasty in handing over defaulted loan accounts to Asset Reconstruction Companies (ARCs) at discounted prices, while hesitating to extend legitimate concessions to the students.  Some of the students have committed suicide due to harassment by ARCs.

18.         Some banks shame the students with meagre default by displaying their photos in public places like criminals.  This is a human right violation.  Recently, Human Rights Commission levied a penalty of Rs.1 lakh on Central Bank of India for this type of shaming the student in public places.

Thirteen Suggestions from ELTF

1. The Government should ensure 100% reimbursement of Interest Subsidy.   The amount not paid by the Government should not be loaded to the Loan Account of the student. 
2. Separate norms can be fixed for Education Loans for classification of NPAs. 
3. Since the Government of India reimburses Interest Subsidy, CAG Auditing of Interest Subsidy Management should be carried out periodically at individual bank level.
4. A new Institution to provide refinance for all Education Loans should be set up, in the lines of NABARD and SIDBI. 
5. The rate of interest should be reduced to a minimum level.  A high level committee of all stakeholders should be set up to examine the present education loan and interest subsidy management.
6. IBA and Banks should take interest in creating awareness among students and branch officials. Banks should hold periodical meetings with student borrowers to develop a good relationship.  
7. There should be a Nodal Officer to redress the grievances at the Regional Offices and Head Offices of all banks, RBI and the Ministry of Finance.  
8. Banks should stop handing over defaulted loans to Private Agencies to harass the students for repayment. The banks should not shame the defaulted students by displaying their photos in public places.  Instead they should adopt legal methods for recovery. 
9. A possible nexus between Banks and Asset Recovery Companies (ARC) could be examined from the vigilance angle.  
10. From the data submitted by Finance Ministry to Lok Sabha in Feb 2017, there is no uniformity of disbursements of Education Loans. 
11. Some Public Sector Banks and Private Banks do not effectively participate in this scheme. Some States do not get adequate share of the education loan. The imbalance may be examined. 
12. A ‘National Student Registry’ may be set up for all students, linking their Aadhar Cards.  Banks may be allowed to access the Registry using the Aadhar Card identity of the student, to get updates about the student. 
13. The rulings given by High Courts and Supreme Courts should be scrupulously followed by all banks in the respective states or the country.  Presently, students are forced to approach the Hon’ble Courts for the same issue on which rulings have already been given

Yours faithfully,

K. Srinivasan

Editor in Chief, PreSense

Convenor, Education Loan Task Force (ELTF)

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Interactive session with MOS (Finance & CA) on Education Loan - A brief report

Ministry of Finance tweeted this event in their official twitter on 17th Feb 2017
(L to R) K. Srinivasan (Convenor, ELTF) , Arjun Ram Meghwal (MOS) and Subramania Kumar (ED, IOB)

Education Loan Task Force (ELTF) is one of the three initiatives of this eMagazine PreSense.

Education Loan Task Force (ELTF) was started in 2010 as a social initiative, to create awareness about the Education Loan Scheme of the Indian Banks Association (IBA).  ELTF takes up the common grievances with the managements of banks, IBA, the Government of India and also the Parliament.  ELTF receives daily feedback through its website, www.eltf.in.  ELTF has so far provided clarifications to more than 18,000 students/parents.  Around 3,000 grievances have been forwarded to the managements of banks for investigation and settlement. 

ELTF strongly feels that Education Loan should not be treated as yet another commercial loan.  It is an investment on the youth of this country for nation building.  This category needs to be treated differently from the other loan segments.

This ezine PreSense and ELTF organised an ‘Interactive Session’ with Shri Arjun Ram Meghwal, Hon’ble Union Minister of State (Finance & Corporate Affairs) with bankers, students, parents and social workers on Friday, 17^th February 2017 at Chennai. Senior level Executives from 40 banks participated, besides several NGOs, parents, students and the media.

Susan Koshy, Editor welcomed the gathering and explained the various social initiatives of the ezine PreSense.  K. Srinivasan, Editor in Chief, PreSense presented the various issues and challenges faced by students and parents right from the application stage to the repayment stage of Education Loan.  Shri Arjun Ram Meghwal interacted with some of the participating parents and bankers to understand the difficulties.  In his reply address, he promised to discuss all the problems with the government officials at New Delhi and find a solution.  He also promised that he would involve ELTF in those discussions.

Shri Arjun Ram Meghwal, after listening to all the grievances from various participants, assured that the Government would immediately advise all the Banks to nominate a Nodal Officer at all Regional / Zonal Offices and a Grievances Cell at Head Offices exclusively to resolve Education Loan grievances. 

Hon'ble Minister honouring Divya.  Shri Krishna Kumar, CGM, Canara Bank looking on 

During this event, PreSense and ELTF honoured Divya, the first beneficiary of the ELTF activity, for her outstanding performance during her study period and employment with a software company.  Although she was given a 10-years repayment schedule, she has almost completely repaid her education loan to Canara Bank within 3 years.  The Hon’ble Minister congratulated her.

PreSense also announced an Award Scheme for Bank Officials and Students for excellence in implementation and utilisation of the Education Loan Scheme respectively.  The Awards will be presented during the Sansad Ratna Awards function scheduled for 27^th May 2017 at IIT Madras in the presence of Parliamentarians and eminent persons.

Win TV, one of the leading Tamil channels telecast the event live.  Clarion Hotel President, Chennai was the ‘Hospitality Partner’.

On behalf of ELTF, 13 suggestions were submitted to the Hon’ble Minister.

1.  The Government should ensure 100% reimbursement of the Interest Subsidy.   The   amount not paid by the Government should not be loaded onto the Loan Account of the student. 

2.    Separate norms can be fixed for Education Loans for classification as NPA.

3.    Since the Government of India reimburses Interest Subsidy, CAG Auditing of the Interest Subsidy Management should be carried out periodically at individual bank level.

4.    A new Institution in the lines of NABARD and SIDBI should be set up to provide refinance for all Education Loans. 

5.    The rate of interest should be reduced to a minimum level.

6.    A high level committee of all stakeholders should be set up to examine the present Education Loan Scheme and Interest Subsidy Management.

7.    IBA and Banks should take interest in creating awareness about the Scheme among the students and the bank branch officials. Banks should hold periodical meetings with student borrowers to develop a good relationship.

8.    There should be a Nodal Officer to redress the grievances at the Regional Offices and Head Offices of all banks, RBI and the Ministry of Finance.

9.    Banks should stop handing over defaulted loans to Private Agencies, who harass the students for repayment. The banks should not traumatise the defaulting students by displaying their photos in public places.  Instead they should adopt legal methods for recovery.

10. A possible nexus between Banks and Asset Recovery Companies (ARC) could be investigated from the vigilance angle.

11. From the data submitted by the Finance Ministry to the Lok Sabha in Feb 2017, there is no uniformity among the banks in the disbursements of Education Loans. Some Public Sector Banks and Private Banks barely participate in this Scheme. Some states do not get an adequate share of the education loan. The imbalance may be examined.

12.  A ‘National Student Registry’ may be set up for all students, linking their Aadhar Cards.  Banks may be allowed to access the Registry using the Aadhar Card identity of the student, to get updates about the student.

13. The rulings given by High Courts and Supreme Courts should be scrupulously followed by all banks in the respective states or the country.  Presently, students are forced to approach the Hon’ble Courts for the same issue on which rulings have already been given.

 Some Important Statistics about Education Loan Accounts

All India – As On Last Friday of December – Source: Reserve Bank of India Website

	Gross Bank Credit Rs. In billion	Education Loan* Rs. In billion	% of Education loan over gross credit
Dec 2014	58935	591	1.00
Dec 2015	64335	609	0.94
Dec 2016	66458	608	0.91

*Under Priority Sector

At the national level, the share of outstanding Education Loan over Gross Bank Credit is reducing every year. Only around 2.6 million students are the beneficiaries as on date. ELTF feels that this is not sufficient for a country of our size, keeping in mind the growth and development of our nation. 

  

Some of the States do not seem to have adequate disbursements, while some other states have received more of the share of Education Loan disbursements. 

K. Srinivasan, Editor in Chief, PreSense

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Interactive Session on Education Loan at Chennai with MOS (Finance & CA) - Problems presented to Minister

An interactive session with Shri Arjun Ram Meghwal was held on 17th February 2017 at Chennai to discuss various education loan issues.  40 Banks and several social workers participated and interacted with the Minister.  During this time, on behalf of ELTF, a background note was circulated.  Please read the contents.

Education Loans – A Synopsis – Background note circulated on 17^th February 2017

Education Loan Task Force (ELTF) is one of the three initiatives of the eMagazine PreSense, which is being published for the past 120 months to generate positive vibrations.  The eMagazine was initiated in March 2006 when former President of India, Dr APJ Abdul Kalam suggested a medium to promote positivity through communication.

Education Loan Task Force (ELTF) was started in 2010 as a social initiative and to create awareness about the Education Loan Schemes of the Indian Banks Association (IBA).  ELTF takes up the common grievances with the managements of banks, IBA, the Government of India and also the Parliament.  ELTF receives daily feedback through its website, www.eltf.in.  ELTF has so far provided clarifications to more than 18,000 students/parents.  Around 3,000 grievances have been forwarded to the managements of banks for investigation and settlement. 

ELTF strongly feels that Education Loan should not be treated as yet another commercial loan.  It is an investment on the youth of this country for nation building.  This category needs to be treated differently from the other loan segments. Some of the problems faced by students and bankers are given below:

Application Stage

·         Lack of awareness among the branch officials and students on the IBA Scheme.  The IBA guidelines are not followed.

·         Banks are not aware that the Service Area Concept is not applicable for Education Loans. They follow it in violation of the RBI guidelines.  Students are therefore shunted from branch to branch, and processing of applications takes a long time.

·         Students do not get proper guidance and treatment during the application stage. 

·         The Vidyalakshmi Portal www.vidyalakshmi.co.in, launched by Hon’ble Finance Minister in 2015 is still not popular.

Interest Subsidy

·         Banks do not claim interest subsidy properly, in spite of the facility of technology.  For this reason, many eligible poor students have been denied interest subsidy.

·         Although the Government of India promises 100% Interest Subsidy during the moratorium period, in reality only around 25-30% of the claimed amount is reimbursed.

·         At present, only students from the Minority Section of the society are eligible for Interest Subsidy for foreign studies.  It should be extended to all eligible students from economically weaker background.

·         Interest Subsidy is given only for Professional and Technical courses studied after the 12^th Standard.  This should be considered for vocational courses, which many poor students take up, after completing the 10^th standard.

·         Even after the release of subsidy by the Government, banks have been reported to withhold the reimbursed subsidy for an unduly long period before releasing it to the loan accounts of students.  The students in the meantime, have to pay interest unnecessarily. 

·         It is suggested that instead of the Interest Subsidy Scheme, ‘Interest Free Loan’ can be considered for the moratorium period. 

·         The Government should advise the Comptroller and Audit General (CAG) to audit the banks for ‘Interest Subsidy’ management.

Management of Loan Accounts

·         Many bank branches insist on security for even those loans that are less than Rs.7.50 lakhs, which are covered under the Credit Guarantee Scheme.

·         Branches demand payment of interest during the study period as a pre-condition for disbursement of the next instalment.

·         Branches do not provide proper clarifications about the loan accounts.  Students therefore write to the ELTF for clarifications, which the branches should have given in the first place.

Repayment and NPA

·         Although the IBA Scheme allows 15 years of repayment (with telescopic repayment) after completion of study and a one-year moratorium period, many banks pressurise the students to repay the loans in 3-5 years.   A proper repayment schedule is not provided to the students. 

·         An additional moratorium period of 6 months, two or three times, is not provided by the banks.  The students get into a debt trap and their credit rating suffers.

·         There is no proper communication between the students and the branches after disbursement of the loan.

·         Due to improper adherence to the IBA guidelines by banks and also due to the short receipt of interest subsidy, the overdue interest is added to the principal loan account, and it is classified as Non-Performing Asset (NPA).

·         Some of the banks hand over the loan accounts to Private Agencies (ARCs) who harass the students to recover the loans.  Banks seem willing to pay more to ARCs, instead of extending legitimate concessions to the students.

·         Some banks harass the students over small overdues, by displaying their photos prominently in public places.  Some students have committed suicide due to such harassment by banks and ARCs. Recently, NHRC fined one bank over such harassment.

·         If the existing NPAs get rescheduled properly with a proper repayment schedule, the NPA level can be reduced to 20% of the existing level.

What ELTF Demands?

• ·   The Government should ensure 100% reimbursement of Interest Subsidy.   The amount not paid by the Government should not be included as NPA of the student. 
• ·    A new Institution to provide refinance for all Education Loans should be set up, in the lines of NABARD and SIDBI. 
• ·         Rate of interest should be reduced to a minimum level.
• ·    A high level committee should be set up with all stakeholders to examine the present education loan and interest subsidy management.
• ·         IBA and Banks should take interest in creating awareness among the students and branch officials. Banks should hold periodical meetings with student borrowers.
• ·         There should be a Nodal Officer to redress the grievances at the Regional Offices and Head Offices of all banks, RBI and the Ministry of Finance.
• ·         Banks should stop handing over the loans to Private Agencies, and harassing the students.  Instead they should adopt legal methods for recovery.

Our Appeal

·    Banks should follow IBA / RBI guidelines scrupulously.  Instead of distancing the students from the Bank, they should motivate them through regular communication and interaction.

Some Important Statistics about Education Loan Accounts

Tamil Nadu – As at Dec 2016 – Source: SLBC, Tamil Nadu

	No. of accounts In lakhs	Amount outstanding Rs. Crores	NPA (as at 30.9.2016) Rs. Crores	% of NPA
Public Sector Banks	8.49	16999	2686	15.8
Private Sector Banks	0.61	864	126	14.6
All Banks	9.10	17862	2812	15.7

Top Four Banks Which Have Given Maximum Education Loans in Tamil Nadu

Bank	No of accounts in lakhs	Amount outstanding Rs. Crores
Indian Overseas Bank	2.07	3679
Canara Bank	1.51	3017
Indian Bank	1.44	2906
State Bank of India	1.01	2351
Total	6.03	11953
% age over Tamil Nadu	66.26%	66.91%

These four Banks contribute two-third of the total number of accounts and amount outstanding under Education Loans in Tamil Nadu

All India – As On Last Friday of December – Source: Reserve Bank of India Website

	Gross Bank Credit Rs. In billion	Education Loan* Rs. In billion	% of Education loan over gross credit
Dec 2014	58935	591	1.00
Dec 2015	64335	609	0.94
Dec 2016	66458	608	0.91

*Under Priority Sector

At National level, share of outstanding Education loan over Gross Bank credit is getting reduced year by year. 

Education Loan Disbursement – Source:  Reply in Lok Sabha by Finance Ministry – (Question No.351 of 3 Feb 2017)

	2013-14 Rs. In crores	2014-15 Rs. In crores	2015-16 Rs. In crores
All India	7750	8312	9674
Public Sector Banks	7060	7619	9049
Private Sector Banks	690	693	625
Tamil Nadu	1896	1952	1583

While at National level, disbursements of Education Loans has gone up in 2015-16 as compared to previous years, it has come down in Tamil Nadu. (Please note it is disbursement and not outstanding balance).  In spite of this, the share of Education loans over Gross Bank Credit has come down.

Stand-Up India Loans

Stand-Up India Scheme facilitates bank loans between Rs.10 lakh and Rs.1 Crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise. This enterprise may be in the manufacturing, services or trading sector. In case of non-individual enterprises, at least 51% of the shareholding and controlling stake should be held by either an SC/ST or woman entrepreneur.

This Scheme will benefit 2.5 lakh entrepreneurs through 1.25 lakh bank branches across the country.  The total number of commercial bank branches in Tamil Nadu is 10,259.

In Tamil Nadu as at November 2016, an amount of Rs.145.47 crores is outstanding in 888 loan accounts.  The target for 10,259 branches in Tamil Nadu is 20,518 accounts.

 Eligible applicants can apply online through https://www.standupmitra.in/

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