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.
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 incentives...you 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".
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.