See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/280566302

A REVIEW OF EDUCATIONAL LOANS DISBURSED DURING FY: 2005-2011

Article · September 2012

CITATIONS READS

0 1,203

2 authors, including:

Manoj P K
Cochin University of Science and Technology
135 PUBLICATIONS   352 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Sustainable Business Model for Affordable Housing: A Study of the Cost Structure and Viability of the Projects of Major Real Estate Players in Kerala - Major Research
Project (MRP) sponsored by ICSSR, New Delhi, India View project

Marketing of Banking Services in Kerala in the ICT Era View project

All content following this page was uploaded by Manoj P K on 30 July 2015.

The user has requested enhancement of the downloaded file.

 1

Varghese K.X. and Dr. Manoj P.K.(2012),”A Review of Educational Loans Disbursed
during FY:2005-2011” published in Mirror (ISSN: 2249-8117), Scholars Association of
Kerala, Kottayam – 686 640 (INDIA), Vol. II, No. II-A, Sept. 2012, pp. 94-108.

----------------------------------------------------------------------------------------------------------------

A REVIEW OF EDUCATIONAL LOANS DISBURSED DURING FY: 2005-2011

Varghese K.X. Research Scholar Karpagam University

& Faculty, KMM College of Arts & Science, Trikkakara,
Kochi-682021, Kerala. e-mail: varghesekeyex2003@yahoo.co.in

Dr.Manoj P.K.(Research Guide)

Faculty, Techno Management, CUSAT, Kalamassery, Cochin-22, Kerala

Abstract

Educational loans existed in India before the economic liberalization period. But the same
were treated like personal loans and were available for those who satisfied the conditions of
individual banks. At the instance of the Central Government the IBA had adopted a model
framework for educational loans for the public sector banks in India in the year 2001. Since
then it has been accepted by all the scheduled banks in India, public, private and
cooperatives. The educational loans have since then become an important component of the
personal loans of scheduled banks in India and there has been a domino effect in increase in
loans, NPA, educational institutions and Gross Enrolment Ratio of students in the higher
education scenario. This paper is a humble attempt to 1) highlight the clauses in the norms
for issue of educational loans adopted by the Indian Banks Association 2) analyse the
growth of the educational loans vis-à-vis other forms of personal loans at the national level
and 3) showcase the disbursements of educational loans in Kerala State from secondary
data and explores the possibility of further studies on the subject.

Key words: Educational loans, Personal loans, NPAs (Non-performing Assets), GER
(Gross Enrolment Ratio), Credit Guarantee Fund.
 16

A Review of Educational loans disbursed during FYs 2005-2011

Part I

Introduction

Consequent to Education Policies of 1986 and 1992 the Central Government decreased the
budget allocation for higher education. Self financing institutions for higher education were
permitted to operate. The educational loans were also begun to be issued by some banks at
the rates of personal loans and to those who are able to provide security. However, there was
no uniformity in their issue or in the rate of interest charged on these loans. In August,
2000, a study group led by Shri. R.J. Kamath, Chairman and Managing Director of Canara
Bank had submitted its report on the model norms for disbursement of educational loans by
Public Sector Banks to the Central Government. Under the direction of the Central
Government, the Public sector banks started giving educational loans more or less on a
uniform basis. In Kerala State scheduled banks in the private sector and cooperative sector
also joined in a modest way. Since then there has been an influx of educational loans in the
country.

On August 4, 2009, the Indian Parliament has passed “The Right of Children to free and
Compulsory Education Bill, 2009” which envisages free and compulsory education to
children in the 6-14 age group. According to Union Human Resource Development Minister
Mr. Kapil Sibal, only 12 out of every 100 children in India reaches graduation level whereas
it is 50-70 in Europe and the global average is 27. The Government wants this to be
increased to atleast 15 by 2012 and 30-35 by 2020. Therefore, there is high necessity for
increase in investment in the field of education in India.

Educational infrastructure can be increased by joint effort of the Government and the private
sector. Admissions to job oriented courses can be secured to deserving candidates through
the provision of educational loans at affordable terms and conditions. In this way substantial
sections of the Indian masses can acquire the necessary skills for getting jobs in India and
abroad. Hence educational loans can be viewed as a powerful tool for economic
development and prosperity of India in the years to come.

The council of ministers at the centre has decided to waive the interest on educational loans
availed from scheduled banks during the moratorium period (i.e. upto one year after the
course or six months after getting of job whichever is less) for students of families with
annual income less than Rs.4.5 lakhs from the 2010-11 academic year. This one time relief
will be available for students who secure admission for technical and professional courses
after plus two. It is estimated that about 5 lakh students will benefit from this scheme.

In 2011 August, the Indian Banks Association(IBA), has revised its model norms for
educational loans. However, it has become operational from June 2012 with modifications as
explained in Part II of this paper.
 2

In a recent report published by the University Grants Commission in India, the number of
Univerisities and colleges in India rose from 190 and 7346 in 1990-91 to 634 and 33024
respectively in 2011. The gross enrolment in higher education during this period increased
from 49,25,000 to 1,69,75,000. This excludes enrolment facilities in polytechnics and
diploma courses.

The Kerala Experience

In the year 2007 the suicide of a student admitted to a self financing college in Kerala
intensified the volume and number of educational loans sanctioned by the Public sector
banks in Kerala. By 2009 December total educational loans outstanding crossed Rs.
4597Crores. State Bank of Travancore, a subsidiary of the State Bank of India lead all other
banks with 31.56% of these loans. In 2010 December these figures were Rs. 5833 and 30.55
% . The corresponding figures for 2011 December were Rs. 7036 Crores and 28.34%. Many
of the banks had not started their mite before this suicide. Table 5 to 10 illustrate the
performance of banks in Kerala with total outstanding loan amount of Rs. 10 crores and
above

Objectives of the paper

1) To highlight the clauses for obtaining educational loans from scheduled banks in
India
2) To analyse the educational loans disbursed in India and the state of Kerala for the
years 2004-5 to 2010-11 and
3) To make suggestions for a detailed study

Methodology

The study is descriptive in nature. The secondary data was collected from the Trends and
Progress of Banking in India Reports of the Reserve Bank of India, the State Level Bankers
Committee (SLBC) of Kerala‟s reports, Published Research Reports, reports in the
newspapers and data available from the website. The study covers a period of seven years
commencing from April 2004 to December 2011 during which period there has been an
active growth in the disbursement of education loans in the country.

Hypotheses tested

1. Ho: The Educational loans do not show higher growth rate than other personal loans
2. Ho: The NPA both at the state and at the national level are the same.
 3

Tools of the study

Horizontal and Vertical Analyses of educational loans issued over the years and trend
analysis for forecasting the future projections of educational loans vis-à-vis all other
categories of personal loans and for testing the hypotheses.

Period of the study

Although educational loans were used to be given by banks as early as 1986 there was no
authentic statistics of the same. Since authentic data have been started to be disseminated by
the Reserve Bank from the year 2004 onwards this study is incorporating data available from
2004 to 2011.

Limitations of the study

This study attempts to analyse the growth of educational loans over the years alongwith the
mounting NPAs from secondary data only.

Scope for further study

Empirical study on the use of the educational loans by borrowers, courses pursued, their
performance in studies, placement, repayment, NPAs and attendant problems to be addressed

Literature Review

1. In a study Narayana has stated that it is pertinent to all developing countries to allow
educational loans to supplement budgetary shortcomings as well as to maintain
reasonable fee structure by Government and aided colleges as was done in Karnataka
and for that matter in other states in India.
2. Harsh Gangadhar conducted his study on educational loan schemes by scheduled
commercial banks in Chandigarh. He has highlighted absence of previous studies on
education loan schemes. During the years 2004 to 2010 when his study took place,
the interest on educational loans were high and that it was disbursed on purely
commercial basis. In some cases the loans were taken to get visa to foreign countries
and after reaching there the loans were fully repaid. The banks did not reveal the
identity of the borrowers as it will breach the privacy of the banker customer
relationship. The National Loan Scholarship Scheme introduced long back in 1963 was
the oldest form of educational loans in India. This National Loan Scholarship Scheme
was managed through the State Governments. Under this scheme, interest free loans
were provided to meritorious students for pursuing post-Metric education. But the scheme
had to be stopped in the year 1991 due to bad recovery of loans and economic crisis
facing Government of India at that time.
3. In his study Jandhyala B G Tilak stated that the Government is paying too much
attention for the primary education for long. It has recently come up with
supplementing the expansion of higher education through private participation. This
he believes that, is based on a neo-liberal market philosophy.
 4

Part II

Framework of the educational loan schemes in India introduced by the Indian Banks’
Association

i) Educational loans are available to meritorious students in India for securing

admission for a recognized course which is a regular and not distant education in
recognized institutions. The duration of the course should be 9 months or more after
plus two. Loan is also available for recognized courses of reputed institutions in
foreign countries. There is no age bar for the applicants of educational loans.
ii) The amount of the loan will include tuition fee, examination fee, library, laboratory
fees, cost of books, study materials, uniform, computer, study tour and so on.
iii) A maximum of Rs.10 lakhs is fixed for studies in India and Rs.20 lakhs for studies
abroad.
iv) A student who is eligible for scholarship will get only the balance amount of his
eligible and sanctioned amount of the loan to avoid double benefit.
v) There is no need of security for loan upto Rs.4 lakhs. Both the student and the parent
will be responsible. Between Rs.4 and 7.5 lakhs the ability of the parents to repay
should be satisfied. Above Rs. 7.5 lakhs prescribed assets should be provided as
security.
vi) The interest rate varies from bank to bank. Most of the banks charge half to one
percent above their base rate. Interest is calculated to the principal amount of the loan
for repayment after the moratorium period only for the Economically and Socially
Backward Classes.
vii) The loan has to be repaid in Equated monthly instalments one year after the course
completion or 6 months after getting job whichever is early. This period before the
start of the repayment of instalments is called moratorium period. The maximum
period allowed for repayment was seven years after the moratorium period.
viii) The following documents should be submitted to the banks for availing
educational loans
 . Loan application on individual bank‟s forms
 Passport size photograph
 Proof of address
 Proof of age
 Proof of having secured pass marks in the last qualifying examination
 Letter of admission issued by the institution concerned.
 Statement of fee structure issued by the institution
 Copies of the approval certificates issued by the concerned authorities, like AICTE,
University, State Government, etc. to the educational institution.
 Details of Assets and Liabilities of parent/guarantors/co-obligators, if applicable
 Documents necessary for mortgage of the immovable property with non-encumbrance
certificate wherever applicable
 Photocopy of passport and visa incase of study abroad
 5

ix) The loan application should be placed at the bank nearest to the place of residence of
parents or the branch of a bank where the parent has an operative account.

Almost all banks are seeking semester wise mark sheets of borrowing students to
make sure that they are doing well in their studies before release of the remaining
instalments of the loan.

Salient features of the revised norms for educational loans from June 2012 are as
follows:

 Admission under management quota has been kept outside the scope of the scheme.
 Part time courses/research work/job oriented courses can also be included at the
issuing bankers‟ discretion
 Banks can rate the institution and the students for deciding the quality of the
asset(loan). A high rated student can be considered for low interest rate on the loan.
 Repayment period for loans upto 7.5 lakhs extended upto 10 years and above 7.5
lakhs extended upto 15 years.
 Individual banks can take insurance policy on the life of the student to cover the loan
amount.
 Proposal to the Government to set up a Credit Guarantee Fund for tackling with non
payment of educational loans upto Rs.4 lakhs.

The most important change in the revised guidelines is the exclusion of the students who got
admission under management quota. This includes those who join for General Nursing and
Midwifery (GNM) Course also.

Till March 31st 2009, total loans disbursed in Kerala state alone amounted to Rs.5600 crores.
Three fourths of these loans were issued for GNM students. According to The Mathrubhumi
dated 18th April, 2011, repayment towards these loans are not punctual. The clause in the
revised guidelines to curb students under management quota including GNM students may be
due to this mounting NPAs.
 6

Part III

Review of the disbursement of educational loans

TABLE 1

STATEMENT SHOWING PERSONAL LOANS OF SCHEDULED BANKS OUTSTANDING

AS ON 31ST OF MARCH 2005 -2011(IN RS.CRORES)
YEARS
BREAK UP OF PERSONAL LOANS 2005 2006 2007 2008 2009 2010 2011
CONSUMER DURABLES 9083 8783 9189 8799 8187 8290 10160
HOUSING LOANS 128728 186429 230990 257792 276957 300930 346110
ADVANCES AGAINST F.D. 29850 34897 40835 45005 48676
48650 60520
ADVANCES AGAINST SHARE, BOND 4117 5089 4876 4177 2286
2860 3610
CREDIT CARD OUTSTANDINGS 5760 9177 18299 26393 28000
20150 18100
EDUCATION 5119 10057 15208 20532 28579
36860 43710
VEHICLE LOANS 63790 79310
OTHER PERSONAL LOANS 62423 99345 133361 150658 169795 104090 123850
TOTAL PERSONAL LOANS 245080 353777 452758 513356 562480 585620 685370
SOURCE: COMPILED FROM REPORT ON TRENDS AND PROGRESS OF BANKING IN INDIA, RBI, FOR 2005 TO 2011 MARCH

Table 1 reveals that over a period of seven years starting from the year 2005 the total of the personal loans have risen from Rs.2,45,080 crores to
685,370 crores. The educational loans have risen from Rs. 5,119 Crores to Rs43710 Crores, the housing loans have risen from Rs.1,28,728 Crores
to Rs. 3,46,110 Crores, Consumer durables have shown a decreasing trend from Rs.9083 crores to Rs.8187 crores in 2009 and then rose to 10160
Crores in 2011, advances against fixed deposits from Rs.29850 crores to Rs. 60520 crores, credit card out standings from Rs.5,760crores to
Rs.18100 crores, and other personal loans from Rs.62,423 crores to Rs. 203,160 (79310+ 123850) crores.
 7

TABLE 2

COMPONENTS OF PERSONAL LOANS AS A PERCENTAGE TO THE TOTAL EVERY YEAR

COMPONENTS/YEARS 2005 2006 2007 2008 2009 2010 2011
CONSUMER DURABLES 3.71 2.48 2.03 1.71 1.46 1.416 1.48
HOUSING LOANS 52.52 52.70 51.02 50.22 49.24 51.387 50.50
ADVANCES AGAINST F.D. 12.18 9.86 9.02 8.77 8.65 8.307 8.83
ADVANCES AGAINST SHARE, BOND 1.68 1.44 1.08 0.81 0.41 0.488 0.53
CREDIT CARD OUTSTANDINGS 2.35 2.59 4.04 5.14 4.98 3.441 2.64
EDUCATION 2.09 2.84 3.36 4.00 5.08 6.294 6.38
VEHICLE LOANS 10.893 11.57
OTHER PERSONAL LOANS 25.47 28.10 29.46 29.35 30.19 17.774 18.07
TOTAL PERSONAL LOANS 100.00 100.00 100.00 100.00 100.00 100.00 100.00

(SOURCE: COMPILED FROM REPORT ON TRENDS AND PROGRESS OF BANKING IN INDIA, RBI, FOR 2005 TO 2011
MARCH)

A vertical analysis of the components of personal loans is presented in table 2. The table reveals that Loans against credit cards only moved
neck and neck with educational loans in volume till the year ending 2008 and thereafter the former slackened its pace. The other personal loans
bifurcated into vehicle loans from the year 2010 onwards. But there is more or less nil growth in other personal loans over these years. Only the
educational loans continued its growth from 2.09 percent to 6.38 percent of the total loans disbursed over the years without any slumps in any
year.

Hence the first hypothesis that the educational loans do not have a higher growth rate is rejected. Educational loans exhibited a steady growth
year after year among other personal loans as per table 2.

TABLE 3
 8

PERSONAL LOANS ANALYSED INTO YEAR ON YEAR GROWTH PERCENTAGES FOR THE YEARS 2006 TO 2011

ACTUAL DISBURSEMENTS IN RS. CRORES Y-ON-Y GROWTH 2006-2011(%)

COMPONENTS/YEAR 2005 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
CONSUMER
DURABLES 9,083 8,783 9,189 8,799 8,187 8290 10160 -3.30 4.62 -4.24 -6.96 1.26 22.56
HOUSING LOANS 128,728 186,429 230,990 257,792 276,957 300930 346110 44.82 23.90 11.60 7.43 8.66 15.01
ADVANCES AGAINST
F.D. 29,850 34,897 40,835 45,005 48,676 48650 60520 16.91 17.02 10.21 8.16 -0.05 24.40
ADVANCES AGAINST - -
SHARE, BOND 4,117 5,089 4,876 4,177 2,286 2860 3610 23.61 -4.19 14.34 45.27 25.11 26.22
CREDIT CARD - -
OUTSTANDINGS 5,760 9,177 18,299 26,393 28,000 20150 18100 59.32 99.40 44.23 6.09 28.04 10.17
EDUCATION 5,119 10,057 15,208 20,532 28,579 36860 43710 96.46 51.22 35.01 39.19 28.98 18.58
VEHICLE LOANS 63790 79310 24.33
OTHER PERSONAL -
LOANS 62,423 99,345 133,361 150,658 169,795 104090 123850 59.15 34.24 12.97 12.70 38.70 18.98
TOTAL PERSONAL
LOANS 245,080 353,777 452,758 513,356 562,480 585620 685370 44.35 27.98 13.38 9.57 4.11 17.03

(SOURCE: COMPILED FROM REPORT ON TRENDS AND PROGRESS OF BANKING IN INDIA, RBI, FOR 2005 TO 2011 MARCH)

Table 3 shows that from the year 2005 the consumer durables encountered negative growth rates, housing loans marked the highest growth rate
in 2006 then it started to descend and in the year 2011 shows 15% growth over the preceding year. Advances against FD and Advances against
Share and Bond also dilly and dallied in between 2006 and 2011. The credit card loans recorded a phenomenal growth of 99.40 percent in 2007
then it nosedived into 6 percent in 2009 then rose to 28 per cent in 2010 and again declined to 10.17 percent in 2011. The education loans
category has a steep rise in 2006 with 96 percent growth over the year behind and then the deceleration in the growth puts it into 18.58% growth
Y on Y in 2011.

TABLE 4
 9

PERSONAL LOANS FORECAST FOR THE YEARS 2012 TO 2016 BY LINEAR TREND

CONSU ADVANC ADVANCES CREDIT

EDUCA OTHER TOTAL
MER HOUSING ES AGAINST CARD VEHICLE
Year TION PERSONAL PERSONAL
DURAB LOANS AGAINS SHARE, OUTSTA LOANS
LOAN LOANS LOANS
LES T F.D. BOND NDINGS
2005 9083 128728 29850 4117 5760 5119 62423 245080
2006 8783 186429 34897 5089 9177 10057 99345 353777
2007 9189 230990 40835 4876 18299 15208 133361 452758
2008 8799 257792 45005 4177 26393 20532 150658 513356
2009 8187 276957 48676 2286 28000 28579 169795 562480
2010 8290 300930 48650 2860 20150 36860 63790 104090 585620
2011 10160 346110 60520 3610 18100 43710 79310 123850 685370
2012 9105 379293 62256 2635 27792 48974 94830 153390 756103
2013 9149 412404 66804 2329 30245 55500 110350 161611 823756
2014 9194 445516 71353 2023 32697 62027 125870 169833 891408
2015 9238 478627 75901 1717 35149 68554 141390 178054 959061
2016 9282 511738 80450 1411 37602 75081 156910 186276 1026714
(SOURCE: COMPILED FROM REPORT ON TRENDS AND PROGRESS OF BANKING IN INDIA, RBI, FOR 2005 TO 2011 MARCH)

The forecast for personal loan components is presented in table 4 shows 116% growth by volume in 2016 for the total personal loans at current
prices (2011). The educational loans exhibit a growth by 172 percent from 2011 to 2016. Advances against share and bond makes a negative
growth which is also the case of consumer durable loans during the same period.
 10

TABLE 5
Statement of Educational loans Distributed in Kerala as on December 2009(Rs.Lakhs)
Sl. Loans disbursed during the year 2009 Outstanding as at Dec. 2009 NPAs As at Dec. 2009
BANK
No. No Amount No Amount No Amount
1 STATE BANK OF INDIA 664 14128 30857 66823 1898 3287
2 STATE BANK OF TRVCRE 23210 38724 83389 145056 761 1216
3 BANK OF BARODA 242 441 3803 6709 109 151
4 BANK OF INDIA 325 765 5620 10400 18 17
5 CANARA BANK 11528 9424 34380 62106 1432 2386
6 CENTRAL BANK OF IND 985 1538 5385 8805 24 33
7 CORPORATION BANK 283 261 4235 8320 193 296
8 INDIAN BANK 3579 2825 6967 12765 114 122
9 INDIAN OVERSEAS BANK 490 898 10635 11738 1488 1643
10 PUNJAB NATIONAL BANK 4403 3203 7965 12236 173 108
11 SYNDICATE BANK 1691 2922 12163 19250 173 190
12 UNION BANK OF INDIA 1767 1760 13283 22680 565 635
13 OTHER PUB SECT BANKS 6090 6570 22889 32880 1913 891
14 CATHOLIC SYRIAN BANK 309 709 3112 5449 112 164
15 DHANALAKSHMI BANK 68 107 880 1564 86 163
16 FEDERAL BANK 2643 8448 12009 19117 1036 1299
17 SOUTH INDIAN BANK 284 862 1861 3116 112 146
18 OTHER PVT SECTOR BANKS 498 809 6140 10685 422 655
TOTAL PUBLIC SECTOR BANKS 55257 83459 241571 419769 5035 10976
TOTAL PVT SECTOR BANKS 3802 10935 24002 39931 1768 2427
TOTAL FOR THE STATE 59059 94394 265573 459700 6803 13403
(Source: compiled from SLBC, Kerala reports, Performance of Educational loans table 10.33 of Dec 2009)
Table 5 shows that till December 2009 the public sector banks disbursed loans for 93.56 percent of the total borrowers in the state of Kerala.
The corresponding loans amounted to Rs. 835 crores. Out of this the State Bank of Travancore‟s share was Rs.387 crores. The second place
goes to State Bank of India with Rs. 141 crores. The public sector banks holds 91.31 per cent of the entire amount outstanding towards
 11

educational loans in the State. In the private sector banks The Federal Bank is the topper with an outstanding loan portfolio of Rs.191 crores.
Catholic Syrian Bank, South Indian Bank and Dhanalaxmi Bank are the other contributors. The non performing assets or instalments due but
not paid for more than a year for the state amounted to Rs. 134 crores which was 2.91 percent of the outstanding loan amount.
TABLE 6
Statement of Educational loans Distributed in Kerala as on December 2010(Rs.Lakhs)
Year ending Dec 2010 Outstanding as on Dec2010 NPA as on Dec 2010
1 STATE BANK OF INDIA 6060 7748 44255 80530 3620 6842
2 STATE BANK OF TRVCRE 10201 19109 94588 178214 743 1398
3 BANK OF BARODA 41 91 4395 8553 209 293
4 BANK OF INDIA 210 158 6470 13002 190 569
5 CANARA BANK 7362 3467 37121 75616 1436 2409
6 CENTRAL BANK OF IND 361 269 6941 14141 49 36
7 CORPORATION BANK 425 369 5165 10781 396 629
8 INDIAN BANK 1024 780 7252 15853 .. ..
9 INDIAN OVERSEAS BANK 1406 1233 10143 19119 1428 4641
10 PUNJAB NATIONAL BANK 3077 1635 9957 17069 256 252
11 SYNDICATE BANK 860 1155 14242 26102 436 599
12 UNION BANK OF INDIA 1885 16219 30709 .. ..
13 VIJAYA BANK 394 249 3147 5293 234 326
14 CATHOLIC SYRIAN BANK 426 1078 3752 6186 130 179
15 DHANALAKSHMI BANK 129 84 1086 1931 114 127
16 FEDERAL BANK 2761 1634 13802 23780 1314 1900
17 SOUTH INDIAN BANK 316 878 2629 4251 113 189
Total -Public Sector Banks 37435 41678 285705 536051 5173 18559
Total - Pvt. Sector Banks 3907 4091 27189 47251 2687 4291
Total For State 41342 45769 312894 583302 7860 22849
(Source: compiled from SLBC, Kerala reports, Performance of Educational loans table 9.31 of Dec 2010)
Table 6 shows that by December 2010 the public sector banks disbursed 91.06 percent of the education loans in Kerala. The total
outstanding loans in the state rose to Rs.5833 crores which is 26.89 per cent more than the figure of 2009. The NPA also rose to Rs.228 crores
which is 3.91 % of the total outstanding and 70.14 per cent more than the year before.
 12

TABLE 7
Statement of Educational loans Distributed in Kerala as on December 2011(Rs.Lakhs)
Sl Year ending Dec 2011 Outstanding as on Dec2011 NPA as on Dec 2011
Bank
No No Amount No Amount No Amount
1 STATE BANK OF INDIA 11530 27730 48686 103508 5780 9859
2 STATE BANK OF TRVCRE 9741 8978 97837 199434 2655 5773
3 BANK OF BARODA 714 1477 4797 10333 302 482
4 BANK OF INDIA 2240 3047 7249 15507 1221 2423
5 CANARA BANK 14010 10417 39231 86948 4761 7955
6 CENTRAL BANK OF IND 1969 4664 8697 20000 166 304
7 CORPORATION BANK 1838 1663 6228 13707 747 1526
8 INDIAN BANK 2708 2954 8567 18795 311 570
9 INDIAN OVERSEAS BANK 6735 11894 13542 24104 2216 3952
10 PUNJAB NATIONAL BANK 5482 4842 11490 22088 177 264
11 SYNDICATE BANK 3519 5376 16478 32127 813 1518
12 UCO BANK 280 338 2498 5414 14 30
13 UNION BANK OF INDIA 4841 4204 18897 38156 2700 4907
14 VIJAYA BANK 1064 1103 3431 6451 427 712
15 CATHOLIC SYRIAN BANK 784 1853 4440 7717 170 271
16 DHANLAXMI BANK 704 483 1134 2241 45 20
17 FEDERAL BANK 10535 7770 16868 28252
18 SOUTH INDIAN BANK 1458 1414 4086 6329 169 243
Total - Public Sector Banks 75339 102244 317904 647475 22803 40845
Total - Pvt. Sector Banks 13968 12161 32670 56084 2055 3859
Total For State 89307 114405 350574 703559 24858 44704
(Source: compiled from SLBC, Kerala reports, Performance of Educational loans table 9.31 of Dec 2011)

In December 2011 the total loans outstanding in the state amounted to Rs.7036 crores as shown by table 7. The percentage share of the
public sector banks was 92. The NPA on this period is Rs.447 which is 6.35 per cent of the total outstanding loans in the state.
 14

Table 8
SHARE OF PUBLIC SECTOR AND PRIVATE SECTOR BANKS IN KERALA IN
THE OUTSTANDING EDUCATIONAL LOANS IN KERALA AS AT DECEMBER
Total PUBLIC % of PRIVATE % of
Share Share
YEARS for the SECTOR the SECTOR the
BANKS of SBT of SBI
State BANKS Total Total
2009 459700 419769 91.31 39931 8.69 145056 66823
2010 583302 536051 91.90 47251 8.10 178214 80530
2011 703559 647475 92.03 56084 7.97 199434 103508
(Source: compiled from SLBC, Kerala reports, Performance under Educational
loans of December 2009, 2010 and 2011)

Table 8 displays that Public sector banks dominate in disbursement of educational loans in
Kerala. About 91 to 92 per cent of the loans are from them. The private sector banks service
only below 9 per cent of the loans.
Table 9
Performance of State Bank of Travancore and State Bank of India in Kerala
Year ending December % of the year on year
Loan outstanding Rs.Lakhs total of growth%
2009 2010 2011 2009 2010 2011
State Bank of Travancore 145056 178214 199434 31.55
22.86 11.91
State Bank of India 66823 80530 103508 14.54
20.51 28.53
Other public sector banks
in Kerala 207890 277307 344533 45.22 33.39 24.24
Private Sector Banks and
Co-operatives 39931 47251 56084 8.69 18.33 18.69
TOTAL 459700 583302 703559 100.00 26.89 20.62
(Source: Compiled from SLBC, Kerala reports, Performance under Educational loans of
December 2009, 2010 and 2011)

Table 9 focuses on the relative contribution of State Bank of Travancore and State
Bank of India towards education loans in Kerala. In 2009 The State Bank of Travancore‟s
share was 31.55 per cent of the total loans outstanding in the State of Kerala. The State Bank
of India had a share of 14.54 per cent. All other public sector banks contributed 45.22
percent.The year on year growth in education loan outstanding shows higher for State Bank
of India. However, State Bank of Travancore leads all other banks in the state in all these
years.
 15

Table 10
OUTSTANDING EDUCATIONAL LOANS BY NUMBER AND AMOUNT AND THE
NUMBER AS WELL AS AMOUNT OF NON PERFORMING ASSETS FOR
KERALA STATE FOR THE YEARS ENDING DECEMBER 2009,2010 AND 2011

Non Performing
Active Accounts
Accounts

Year on Year on
Amount Amount
Year No. Year No. Year
Rs. Crores Rs. Crores
Growth % Growth %

2009 265573 4597 .. 6803 134 ..

2010 312894 5833 26.88 7860 228 70.15
2011 350574 7036 20.62 24858 447 96.05

(Source: compiled from SLBC, Kerala reports, Performance under Educational loans of
December 2009, 2010 and 2011)

Table 10 shows that the outstanding loan amount has grown from Rs. 4597 crores in
2009 to Rs. 7036 crores in 2011. The year on year growth of the loan in 2010 is 26.88 per
cent and 20.62 per cent in 2011.
The Non performing loans by volume of the active loans are 2.91% in 2009. The NPA
in 2010 and 2011 were respectively 3.91 and 6.35 per cent respectively. The year on year
growth of the NPA is 70.15 per cent in 2010 and 96.05 per cent in 2011.
At the National level NPA for the same period is 5.5 per cent according Indian Banks
Association Chief Executive Mr. K. Ramakrishnan(source The Hindu dated 27 June 2012).
P.Venugopal, correspondent to The Hindu, Thiruvananthapuram, Kerala, discloses it as 6
per cent. The linear trend forecast of the NPA for the state from the above table is 7 per cent.
Hence the second hypothesis namely the NPA both at the national and state level are the
same is rejected and we can say that Kerala’s NPA on education loan is slightly higher than
the national average.
 16

Part IV

FINDINGS AND SUGGESTIONS

MAJOR FINDINGS OF THE STUDY

1) The total of personal loans disbursed in India over the five year period from 2005 to
2009 have risen by 230 percent while educational loans per se has risen by more than
558 percent. Credit card outstandings for the same period rose to 486 per cent but the
housing loans rose only 215 per cent.

2) It is seen that housing loans have a high volume in comparison to educational loans.
But the rate of growth is twice vis-à-vis educational loans. While educational loans
pick up momentum more than five folds the housing loans keep status quo out of the
total demand for personal loans in the country as on March 31, 2005.

3) Regressing the available data of educational loans and housing loans the future
projections figure out to be 12 times growth from the base year of 2005 to educational
loans in the year 2015 while it is 4 times only for the housing loans.

4) The forecast for total personal loan components shows 116% growth by volume in
2016 at current prices (2011). The educational loans exhibit a growth by 172 percent
from 2011 to 2016. Advances against share and bond makes a negative growth which
is also the case of consumer durable loans during the same period.

5) The Credit Card Outstandings is the only form of personal loans closing in the race
with the educational loans.

6) Both Central and State Governments exert pressure on banks to provide loans,
encourage permission for self financing colleges and deemed universities as policy
decision for enlarging the enrolment in higher education and waiver of interest on
educational loans during moratorium period for the socially and economically
backward classes. The demand for educational loans is bound to rise on account of
these .

7) As at the end of December, 2009, 2010 and 2011 the loan outstanding in Kerala State
amount to Rs. 4597, Rs. 5833 and Rs. 7036 Crores respectively.

8) Ninty one to ninty two Percent of the educational loans disbursed in Kerala are
provided by the public sector banks and the rest is provided by the private sector and
cooperative banks.

9) State Bank of Travancore is the flagship bank in disbursing educational loans in Kerala
State with average of 31.55 per cent of the educational loans sanctioned in the state in
2009. The State Bank of India trails close behind with 14.55 per cent share. All the
 17

other banks including the private and co-operative banks contributed the rest of the
educational loans. The year on year growth is slightly favourable to the State Bank of
India in 2010 and 2011.

10) In the private sector, The Federal Bank Limited is way ahead with educational loans
outstanding of Rs.191 crores in 2009, Rs.238 crores,in 2010 and Rs. 283crores in
2011. Other leading private banks in the state are the Catholic Syrian Bank, the South
Indian Bank and the Dhanalaxmi Bank.

11) Non performing assets of all the banks in Kerala on account of educational loans were
Rs. 134 crores as on 31 December 2009, Rs. 228 crores as on 31 December 2010 and
Rs. 447 Crores as on 31 December 2011. The corresponding per centage NPA for the
three years were 2.91, 3.91 and 6.35 per cent of the total loans outstanding
respectively. The linear trend forecast of the education loan outstanding and NPA for
2012 are 8261 Crores and 582 Crores respectively and the per centage of NPA is 7 per
cent. According to IBA Chief Executive K. Ramakrishnan, the educational loan
portfolio of all the scheduled banks in India is around Rs. 50,000 crores, against 25
lakh accounts for the year ending March 2012 and the NPA is 6 per cent.

12) The hypothesis that, The Educational loans do not show higher growth rate than other
personal loans is disproved and the analysis as per table 2 shows that it has a higher
growth rate than other personal loans in the country.

13) The hypothesis that the NPA both at the national and state level are the same is also
disproved by table 10 and its trend extension to the year 2012. Hence in Kerala the
NPA is slightly higher (7%), than the national average which is 6 per cent.

SUGGESTIONS MADE BASED ON THE FINDINGS OF THE STUDY

The Central and State Governments shall continue to invest in higher education with
appropriate budget allocation every year.
1) It is better to provide educational loans even during the school level for the needy
students so that many of them may be able to finish school successfully and join for
jobs after school itself.
2) Some of the public sector banks are hesitant to provide educational loans and they can
be encouraged to join the others as educational loan is a tool for economic
development.
3) The Credit Guarantee Fund proposed for take over of the NPAs of the banks
belonging to loans upto Rs.4 lakhs as they are issued only at the personal security of
the borrower should be constituted at the earliest. The Central and State
Governments, the corporates, foreign entities, NRIs and the NGOs can contribute to
its corpus.
 18

4) The feasibility of either a national level or a state level test can be thought about for
issue of educational loans as the institutions in the private sector offers educational
facilities and the new guidelines do not make it obligatory on the part of the member
banks to provide loans to students getting admission to management quota of the
institutions. The present system of merit based admission and eligibility for loans
should not be disturbed at the same time. The national objective being increase in the
Graduate ratio to 30-35 by the year 2020 there shall be no discrimination on the basis
of management quota and merit quota in the provision of education loans in the
country.
5) The limit for repayment period can be revised from time to time. The aim of the
repayment period should be to help the borrowers to repay according to their
convenience.
6) For those who take up rural service in Government employment, or those who turn
out to be entrepreneurs can be rewarded with write off of the loan fully or its
subsequent instalments.
7) The same treatment can be done with borrowers who meet with natural calamities or
loss of family or become victims of economic recession and job loss.

CONCLUSION

The study throws light on the efforts of the Government for economic development
through human resource development. Educational loans provide education accessible
even to the less privileged classes of the society and to uplift them to a better standard of
living. Educational loans volume increased 5.58 times for the period 2005 to 2009 and is
projected for growth into 12 times in the year 2015. It calls for necessary increase in the
facilities available for higher studies and participation of more banks into this service.
The guidelines for providing and managing educational loans issued by the Indian Banks
Association and the rising momentum of loan issue projects definite answer to the
development of the country through education of the people. Regarding the question of
NPAs, it is better to write off genuine cases by banks as much as they can and this should
be supplemented by the realization of the floatation of the Credit Guarantee Fund for
writing of unsecured assets from educational loans. Further it is evident from the growth
in NPAs that it is better to issue education loans to job oriented courses and to that extent
empirical studies can be conducted on the composition of the borrowers and their choice
of various courses for study during the past few years.

REFERENCES
1. M. R. Narayana, - Institute for social and Economic Change, India (2005), “Student
Loan by Commercial Banks: A Way to Reduce State Government Financial Support to
Higher Education in India published in The Journal of Developing Areas Vol. 38, No.
2 (Spring), pp. 171-187
2. Harsh Gandhar. (2010) “Educational Loan Scheme Of Scheduled Commercial Banks In
India- An Assessment” IJBEMR Volume 1, Issue 1 ISSN-2229-4848 Sri Krishna International
Research & Educational Consortium http://www.skirec.com – 65
 19

3. Jandhyala B G Tilak: Higher Education Policy in India in Transition, The Economic

& Political Weekly, Vol - XLVII No. 13, March 31, 2012
4. Manmohan & Goyal S.N (1979) Principles of Management Accounting, Agra
Kalatmak Mudrak, Fifth Revised Edition
5. RBI, New Delhi. 2005-2009, “Trends and Progress of Banking in India –Sectoral
Deployment of Gross Bank Credit” http://www.rbi.org.in/home.aspx accessed in
December 2010
6. State Level Bankers‟ Committee, Kerala, archives for 2008-11
http://www.slbckerala.com accessed in December 2010, December 2011, May 2012
7. UNIVERSITY GRANTS COMMISSION , March 21, 2012 Website : www.ugc.ac.in
accessed on July 24, 2012.
8. „Vasudeva Bhattathiri, „Education loan will not be a torture‟-The Malayala
Manaorama, June 1, 2009
9. „Parliament nod for Right to Education Bill‟ The Hindu Aug 5, 2009
10. The Malayala Manorama, „Education Loan-Interest Subsidy for SEBC‟:August 28,
2009
11. The Malayala Manorma „142 Applications for starting new Self-financing Colleges in
Kerala‟, December 23, 2009
12. C.C. Jacob, „Serial article on education loans‟ The Mathrubhumi April 18, 19, 20 &
21, 2011
13. C.S. Ranjith: „Interest subsidy for SEBC not available for GNM student borrowers‟-
The Malayala Manorama July 24, 2011
14. P.Venugopal, „The Flip side of Education Loan‟ „Nursing student‟s death triggers
protest‟ The Hindu May 1, 2012
15. Business Manorama “Incometax exemption on interest on education loan for
individuals under Sec.80E”, May 28, 2012
16. Ministry of statistical programme and implementation website.
http://mospi.nic.in/Mospi_New/site/home.aspx accessed in April 2012
17. The Malayala Manorama, „Interest on education loan may be lowered‟, June 25, 2012
18. Business Manorama, “Tax exemption for children‟s tuition fee and interest on
education loan to husband and wife”, May 28, 2012.
19. Moneylife, “Banks are concerned as non-performing assets in education loans are as
high as 6%.” July 22, 2012(online issue) accessed in July 2012

View publication stats