Banks lending more money to students for higher education

Education loans through banks have grown by 20% in the past couple of years. That’s the fastest ever, and banks want to push that further to 30%-40% going ahead

The season of college admissions has begun and banks are gearing up to facilitate maximum education loans to students. Going by the comments of banking experts, the education loan portfolio has gained momentum and is set to grow multi-fold.

As per the latest report of the Reserve Bank of India (RBI), education loans have increased to Rs43,801 crore in the year to February 2011, from Rs36,522 crore in the previous corresponding period, which is a significant growth of 19.93%.

According to a senior official of the Punjab National Bank (PNB), "Our education loan disbursal has been showing significant growth. As of 31 December 2010, we disbursed around Rs2,750 crore towards education from our Rs21,700 crore retail loan portfolio. Going ahead we are optimistic about the growth of this sector." He added, "Last year we posted a growth of 46% in our education loan portfolio; the current growth is 24%. Though, our volumes are increasing."

Efforts by banks to create awareness and promote education loans are evident. "The sector has grown at 30%-40%.  Large numbers of students going for higher education are approaching banks for loans to fund their studies," said K Unnikrishnan, deputy chief executive, Indian Banks' Association.

However, post the global recession of 2008, the education loan portfolio which has the lowest default rate has witnessed increasing cases of defaults. But banks are not too worried as the non-performing loans have come back to earlier levels.

Vivek Mhatre, general manager, retail, at Union Bank of India, told Moneylife, "Our NPAs on the education loan portfolio are minimal. Since 2008-09, our portfolio has doubled to Rs1,600 crore and we want to increase it by 30-40%. When a student opts for higher education from a premier institute like Indian Business School or IIM, the default risk is almost zero as these institutes have good placement facilities. Now the season of education loans has begun and we are already receiving a steady stream of proposals." Mr Mhatre explained that "as per RBI guidelines there is no collateral required for loans up to Rs4 lakh, so this category has some default rate, but we have a monitoring mechanism in place and there is nothing to worry about."

The government's interest subvention scheme for students from families that have an income of less than Rs4.5 lakh, will also help the default rate to come down. "The interest subvention scheme will significantly bring down the credit default risk involved in education loans," Mr Unnikrishnan said.

Explaining the low NPAs on PNB's education loans portfolio, a bank official said, "Our loan portfolio has picked up in the last 3-4 years and the repayment of those loans is yet to begin, so currently there is no worry of any NPA. Also, there is not much debt on our books pertaining to this portfolio."

State Bank of India (SBI) is the leading player in the education loans segment with 25% of the market share. As per its March 2010 annual report, education loans grew by 34.61% in the year to March 2010.

Mr Unnikrishnan explains, "Banks today, have realised the potential of education loans and lot of effort has been put by them. The loan processing has become faster and going further the growth rate is expected to be consistent. SBI has 25% market share in this portfolio and others like Indian Bank also have a significant amount of education loan portfolio."

Currently, as per RBI guidelines, banks can provide a maximum loan of Rs10 lakh for studies in India and Rs20 lakh for studies abroad.


ARSS Infrastructure wins two orders worth Rs167.65 crore

ARSS won its first BOT based road project worth Rs123 crore from MPRDC. It has also won an order worth Rs44.65 crore to construct a high level bridge over river Brahmani in Odisha

Bhubaneswar based ARSS Infrastructure Projects has won two new work orders worth Rs167.65 crore.

The first order is for construction of road from Damoh-Bhatiagarh-Hirapur on build-operate-transfer (BOT) basis worth Rs123 crore from Madhya Pradesh Road Development Corporation Ltd (MPRDC). The total length of the road is about 69.60km.

The other order is for construction of high level bridge over river Brahmani near Jenapur at 15th km of Kuakhia to NH-200 road via Jenapur in the district of Jajpur, Odisha under NABARD Assistance RIDF XVI. The project is to be completed within three years from the date of commencement of work and the order is worth Rs44.65 crore.

Sunil Agarwal, President& CEO, said, "The order from MPRDC is the first BOT order we've received in road projects, this order closely follows on the heels of the PPP order for the bus terminal we received from the Odisha govt in March."

On Friday, ARSS Infra ended 3.30% down at Rs594.80 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.71% to 19,451.45.


Tata Steel FY11 crude steel production up 4.4% to 6.85MT

Tata Steel Ltd, the Indian operations of the Tata Steel Group, reported a 4.4% growth in FY11 crude steel production to 6.85 million tonnes (MT), exceeding installed capacity at its Jamshedpur facility.

"The crude steel production at 6.855MT exceeded installed capacity of 6.8MT in the second year after commissioning of the expansion project," Tata Steel said in a statement.

The domestic steel major had produced 6.56MT crude steel in the previous fiscal. Crude steel is the first solid steel product upon solidification of liquid steel.

Considered as the world's second-most geographically diversified steel producer with presence in 26 countries, Tata Steel Group is among the top 10 global steel companies, with an annual crude steel making capacity of over 28MT.

On Friday, Tata Steel ended 1.23% down at Rs629.70 on the Bombay Stock Exchange, while the benchmark Sensex declined 0.71% to 19,451.45.


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