PSB’s efforts in clearing the educational loans ..View of reviving new schemes

Public sector banks ( PSB ) are looking into newer loan products to meet the demand of higher education loans. It is making efforts to recover legacy non-performing assets (NPAs) in education loans. The options include one-time settlement (OTS) or sale of bad loans to asset reconstruction companies (ARCs).

Efforts to clear educational loans –

By the end of the year everyone is concentrating on the clearance of bad debts .Indian Overseas Bank, which had fresh slippages of Rs 300 crore during the quarter ended September on account of education loans, is selling these bad loans to ARCs in an attempt to get them out of the balance sheet. ARCs are also showing interest and negotiations in this deal. These were legacy loans that remained unpaid for seven to eight years.

Indian Bank –

Indian Bank being , another leading PSB has around 3.7% of its gross NPAs in the education loans bracket. Of the total Rs 32,000 crore of gross NPAs, Rs 1,183 crore fell under the category of education loans. Indian Bank MD & CEO S L Jain in an interaction addressed media and told that the educational loans in their NPA are more . But they have revived the education loans scheme and are providing competitive rates to all — whether it is IITs, IIMs, top engineering and management schools.

Bad loans affecting the economy –

Bad loans are higher in the sub-Rs 4 lakh category which are in the nature of unsecured loans. However, among these too, awareness of credit scores is encouraging borrowers to come forward for a settlement. In case of educational loans , various students are struggling to repay because they are either unemployed or underemployed. The government must take a lenient view on education loans that have become NPAs and subsidise or pay the interest, such that banks will not turn them into bad loans. Selling to ARCs will lead to pressurising the students and parents and this will help in the settlement.

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