Education loan comes with an extended repayment period for students

According to the revised model for education loan, the repayment period is now extended up to 15 years depending on the loan amount

Indian Banks' Association (IBA) in its revised circular for education loan has recommended extension for the repayment period depending on the loan amount as well as asked banks to clear a loan application file within a month.

Prabhuta Vyas, senior vice-president, social banking, IBA told Moneylife, "The circular for the revised model on education loan was sent to member banks on 30th August with immediate effect.

Earlier, students had to start repaying one year after completing the course or six months after getting a job, whichever was earlier. The loan repayment tenure was between five to seven years. This has been extended to 10 years for loans up to Rs7.5 lakh and 15 years for loans above Rs7.5 lakh.

IBA had also recommended of creating a credit guarantee fund to tackle the problem of rising defaults in the loan category up to Rs4 lakh. "The recommendation (credit guarantee fund) is still pending with the government."

Prashant Bhonsle, country head of Credila Financial Services, which specialises in education loan says, "From the point of students and parents, the extended repayment is good news. As the EMIs amount decreases, the default risk also gets lower. This would also help to mitigate risk to a certain extend. However, this would be challenging for banks to track student borrowers for 15 years. At Credila, we provided tenure of repayment up to ten years, after understanding the need of the students. We felt that a student should not have any debt obligation during the initial years of his career."

Experts point out that there was no need to extend the repayment period as the student and their parents would have continued to apply for the loan and pay back on time. The higher extension of repayment period may lead to lesser lending by the banks. However, banks have welcomed the revised model of education loan.

An official with leading public sector bank, preferring anonymity, told Moneylife, "Our bank will redraft the scheme according to the revised model and put it before the board for approval. Up to ten years of repayment period is good considering five years of studies and two years of employment. Even housing loan has such repayment period. There is some risk, but the education loan scheme is becoming popular among the students and there is clear demand. Overall this revised model is pretty workable."

B Vara Prasad, general manager (retail, payments and settlements and third party products), Union Bank of India, says, "There is nothing wrong in the revised model. It would put less pressure on the students to repay his loan. We welcome such move."

The revised scheme proposed by IBA has addressed concerns and operational difficulties faced by the lenders. According to the revised model, merit would be the sole criteria to be eligibility for the approval of education loan, admission under management quota would be kept out of the scheme, loan quantum would be justified by the employment benefit and extension of the repayment period to reduce the burden on the beneficiaries.

According the revised model there will be no penalty on prepayment. There would be no processing charges levied on loans sanctioned. If banks charges, processing fee for student going abroad for studies, it would be refunded upon the student taking up the course.

IBA said, "Bank may provide 1% interest concession if interest is services during the study period and subsequent moratorium period prior to commencement of repayment."

It also said that meritorious students from the same family are eligible for the loan. "Existence  of  an  earlier  education  loan  to  the  brother(s)  and or  sister(s) will  not affect  the  eligibility  of  another  meritorious  student  from  the  same  family obtaining education loan as per this scheme from the bank," the IBA said.

According to the current guidelines, banks lend up to Rs4 lakh without any security. But for loans between Rs4 lakh and Rs7.5 lakh, they can ask for personal guarantees, and for a loan above Rs7.5 lakh collateral is required.



Nagesh Kini FCA

6 years ago

Despite our Fundamental Right to Education, it is still an expensive proposition as far as quality education is concerned.
The quality and conditions in civic and state run schools is appalling. Even low income group parents don't mind forgoing a square meal to pay fees to a reasonably well run school.
The RBI ought to consider lowering the rate of interest on all educational loans. When it can reduce the interest rates for corporates as well as housing and personal loans there is no valid reason why poor students' parents have to shell out more.
I can say this on authority as a Trustee of an 100 year old charitable Trust extending financial assistance of over Rs.25 lakhs per annum to nearly 3,700 boys and girls in the villages of coastal Western India.

Exporters to get Diwali gift; interest subsidy on the cards

The finance ministry has agreed for an interest subvention for the export credit and the Reserve Bank of India (RBI) has been asked to notify it soon. An announcement to this effect could be expected by the end of October early November, commerce and industry minister Anand Sharma said

New Delhi: The government is working to announce a Diwali gift for exporters in the form of sops, including interest subsidy, to cushion them from slowdown in the western markets, reports PTI.

"After sectoral reviews, we will be announcing the can expect definitely by the end of October or first week of November," commerce and industry minister Anand Sharma said after presiding over a meeting of an industry-government task force on ways to revive the business confidence.

He said the finance ministry has agreed for an interest subvention for the export credit and the Reserve Bank of India (RBI) has been asked to notify it soon. It may be 2%-3%, sources said.

Concerned over slowdown, lack of investment and rising cost of credit, Mr Sharma agreed with the industry leaders that there should be a roll-back of the interest rates.

The RBI has been tightening the monetary policy to fight inflation and has increased the benchmark short-term interest rates by over 3.50 percentage points since March 2010.

"In my view, there has to be a rollback when it comes to cost of credit for the manufacturing industry. I have raised the issue with the finance minister. The cost of credit is making Indian manufacturing expensive and globally uncompetitive. It would also affect in the long run our exports. These concerns have been fully registered," he said.

Asked about reforms in the foreign direct investment (FDI) policies, Mr Sharma said overseas investment in education sector is being delinked from real-estate. It will be announced in the new policy circular on Friday.

However, on much-awaited FDI in multi-brand retail, the minister gave no assurance except saying, "we will take the steps which are correct and appropriate".


Kaun Banega Crorepati? Everyone except you!

Web post goes viral about enormous revenues earned by the quiz show through SMS only

The fifth season of Kaun Banega Crorepati hasn't failed to deliver. Soon after it started airing, a webpost has appeared on many forums and discussion boards, talking about how the Crorepati makers themselves are rolling in the moolah, thanks to all the aspirants' sms and phone calls.

"Many viewers of Kaun Banega Crorepati have a nagging question: how are the sponsors able to dole out so much money for the seemingly simple questions," starts the post. While the question may appear banal, we understand the angst. When we see Rs 10,000 handed out to someone who answers who wrote the Ramayana after frowning intensely at the computer screen for 10 minutes, we ask the same question too.  

Anyway, back to the show. Of course, the advertisers are there. But then, so are the sms and the phone calls. The web post offers a hypothetical estimate. "Airtel is charging Rs.6/- per SMS sent for this contest. Assuming there are only 100 entries from say 10 cities of some 20 districts in 20 states.  (Rs6/SMS) x 100(entries) x 10(cities) x 20(districts) x 20(states) =6x 100 x 10 x 20 x 20 = Rs.24,00,000. Imagine what if 1000 entries from 100 cities?"
How believable is the math? Not every state has 20 districts, and people from some states may be more occupied with other things. And then, why should we just multiply by Rs 24 lakh by 100? But the number can be adjusted, because the number of sms received are much more.

So yes, that's Rs 24 crores, considering the minimal numbers. Just from sms. And unlike other reality show voting, people eagerly message to KBC numbers, seeking the blessings of lady luck.

And just to rub in the more sour fact: nobody has won the Rs 2 crore prize money. And that is Rs 24 crores from frenzied, hyper-enthusiastic texting.



Ramesh Kapadia

6 years ago

All said and done the programme is a big draw it not only entertains the viewers but also educates them.This time around the programme has also endeavoured to bring in its net a social cause by encouraging the down trodden and the charity it indirectly does by inviting celebraties who devavour this cause.Three cheers to the legend Amitab Bachhan and the star channel.



In Reply to Ramesh Kapadia 6 years ago

I think everybody should lighten up. This is written in a light hearted manner. There isnt even a hint of criticism or suggestion that the organizers are doing anything unethical.

But yes, we are telling readers who wonder at the big money prizes that it is their SMSs, priced at a hefty Rs 6 each add up to a nice bundle of profit.
I am sure many people will find this useful and still like the show ... maybe some may become more careful at how many messages they send!!


6 years ago

Incorrect calculation!!!
If 100 entries make Rs 24 lakh then 1000 entries will make Rs 2.4 crore and not 24 crore!


6 years ago

Even if there are only 4 Lakh correct entries per quiz, the probability of winning is 1/400,000 ie NIL. With 4 Crore entries, the chances are 100 times less. And the prize is a pittance at only Rs 1 Lakh. So the KBC lottery is a mugs game. May be there's nothing illegal about such lotteries, but there's something definitely wrong about extracting money from gullible, poor suckers, who do not know any better. The government is probably indifferent because of the tax revenues from KBC and Airtel.


6 years ago

I fail to understand the reason for the tone and tenor of this article. It's not like the organizers of the show is misleading the public on how much the sms costs. Let me ask you this. Lottery’s in many states is government run. Several people buy the tickets under the hope that they would win the lottery. Will you take the same tone and tenor with the lottery company? This magazine is just trying to stir up some kind of controversy over nothing, by skewing and using unethical journalistic means to cast the people behind the show as some kind of shylocks. I would kindly ask the editors of the magazine to be a little more responsible in their further articles. For godsake!



In Reply to Alexander 6 years ago

I agree that this article should not have come on moneylife. I put moneylife at a very high pedestal for the reason that it has the undaunting courage to stand up, put up fight, raise the voice, create and spread awareness against anything 'that is unethical, wrong, injustice, cheating, fraud, etc. etc.'. I have already read this when I received it on my email as a 'fwd'. It is good to read as a 'fwd', not even worth passing it on further. But the organisers are not 'cheating' or misleading or anything like that when they ask you to sms. People know that they are spending Rs. 6 on each sms in the hope of winning. Very apt example given is of lottery. Yes, what moneylife could bring to light is, in declaring the winners if there is manipulation done, or knowledge of some fixing being done in the winners on the hot seat, which most of us viewers think so when a contestant after winning lakhs of rupees runs the risk of loosing almost everything answers without any lifeline and the answer happens to be right, such as the case of first winner of 1 Crore. There were several speculations and beliefs that it may have been 'fixed'. You could expose such things. In that case, people will think twice before sending sms and your efforts will bear fruit.


In Reply to Prakash 6 years ago

...On second thoughts.. could there be a message that moneylife team wants readers to take ? Such as not to waste money on sms.. can we have some thoughts from the MLD Team ?

Om Prakash

In Reply to Prakash 5 years ago

Such programmes only multiply the wrong temperament (and if I may say - Charecter) in us - LUST to get rich INSTANTLY is getting multiplied EVERY SECOND. Taking clue from FILMY Charecters our society has already become so UNETHICAL. Under the aliby of alerting the society we have "N" no. of TV Channels showing tricks to MURDER etc. Moral Values have gone to its lowest level. Don't know when "abhyuthanam dharmasya ..." Lord Krishna will take birth. I wonder if the Primary School Text Books still have such things as "JHOOTH BOLNA PAP HAI" and if it has, how are we able to coach our children on such sayings.


In Reply to Alexander 6 years ago

i like your broad base thinking.hatsup

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