Education Loans – High targets but slow and skewed progress

As announced in the budget, a web-based portal, Vidya Lakshmi, was launched on the occasion of Independence Day for the benefit of students seeking Educational Loans. The portal is part of a larger program – Pradhan Mantri Vidhya Lakshmi Karyakram, which ensures that no student misses out on higher education for lack of funds. Unfortunately, the release of funds shows a different story. Government had set targets of reaching a Gross Enrolment ratio in Higher Education from 21.1 in 2011-12 to 25.2 by 2016-17 and 30 by 2020. Government has also allocated targets envisaging a 20% growth in loan disbursement and 15% growth in number of loan accounts for the year 2015-16. Loans for educational purposes including vocational courses up to ₹ 10 lakh are considered as priority sector. The outstanding credit for these loans increased by a mere 2.8% as on July 2015 compared to July 2014. The growth in the last 3 years hasn’t been encouraging either, with Public sector banks holding large share of portfolio. Also among the outstanding loans, the South Indian states comprise of 62% of the accounts and 56% of the outstanding credit. This could be due to higher colleges per lakh population along with higher GER in these states.