Rising NPAs in education loan add to banks stress

Education loans too have started bleeding the banking sector with the default in repayment rising to 7.67 per cent of the outstanding amount at March- end, 2017 from 5.7 per cent two years ago.

As per the data compiled by the Indian Banks Association (IBA), the total outstanding education loan at end of the fiscal 2016-17 was Rs 67,678.5 crore, of which Rs 5,191.72 crore was NPA.

The government is already struggling to deal with the problem of mounting NPA in the public sector banks and has drawn a mega recapitalisation plan to strengthen them.

The IBA data revealed that the non-performing asset (NPA) in the segment in percentage of the total loan has been constantly increasing.

The NPA was 5.7 per cent in 2014-15, which rose to 7.3 per cent in the following fiscal and further to 7.67 per cent in the last financial year.

The government had earlier modified the IBAs Model Education Loan Scheme with a view to reduce the incidence of NPAs in the segment.

The changes made in the scheme include extension of repayment period to 15 years and the launch of credit guarantee fund scheme for education loan (CGFEL) for up to Rs 7.5 lakh.

The CGFEL provides guarantee to the extent of 75 per cent of the defaulted loan.

As per the IBA data, state-owned Indian Bank accounted for the maximum education sector bad loan, amounting to Rs 671.37 crore as on March 2017. It was followed by the SBI (Rs 538.17 crore) and Punjab National Bank (Rs 478.03 crore).

[“Source-businesstoday”]