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.

Rs. 5453 crores has been released benefiting over 45 lakh students under Central Sector Interest Subsidy scheme for loans below 1.5 lakhs.

So far, 13 Banks have registered 22 educational loan schemes on the portal

Model Educational Loan Scheme was prepared by Indian Banks’ Association (IBA) in the year 2001. The Scheme was revised in 2012.