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 17th 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 12th Standard.
This should be considered for vocational courses, which many poor
students take up, after completing the 10th 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.
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