Boost for overseas edn loans

There’s no better time to be a student than now. Barely a few weeks after the central Government made study loans cheaper, comes another good news that this might get extended even to loans for overseas studies. This is likely to happen following a decision by the RBI to reduce risk weightage on educational loans to 75% from 125%.

How this move will impact is, banks will now have more lendable funds with them for educational loans, which will lead to a rise in the quantum of loans. Plus, there are little non-performing assets in the bank’s education loans portfolio (bad loans) because most of them take guarantee from the borrower’s parents while granting the loan. Thirdly, educational loans have been included under the priority sector lending which means banks will be under pressure to lend more ELs. In the near future, there might even be a reduction in the interest rate charged on such loans.

Currently, banks charge around 11-11.5%, with a maximum of Rs 7.5 lakhs for studies in India and Rs 15 lakh for studies abroad.

From next year onwards, the central Government will meet the interest cost of an educational loan till such time the borrower-student gets a job. This will apply to those students who belong to the less affluent sections of society, specifically for families who come within the income range of Rs 2.5 lakh per year (approx. Rs 12,000 per month).

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