Education Loan

Topics: Debt, Higher education, Education Pages: 26 (7164 words) Published: July 3, 2013

Volume 1, Issue 1 (2010)


EDUCATIONAL LOAN SCHEME OF SCHEDULED COMMERCIAL BANKS IN INDIA: AN ASSESSMENT Dr. Harsh Gandhar., Assistant Professor in Economics, University School of Open Learning, Panjab University, Chandigarh ABSTRACT Education loans form a part of the priority sector advances of the Public Sector Banks and most of the educational loans are taken for pursuing higher education courses. In the knowledge era, higher education has gained significance all across the world. Like other developing nations, India also faced financial crunch in the early nineties and higher education suffered in terms of allocations. And in the pursuit of raising access ratio in higher education, private institutions entered the field and there has been steep rise in user charges in most-sought-after professional courses like engineering and management in India in the post-reforms period. In the light of the facts that scholarships going to higher education have declined, in real terms, and it is a vehicle of upward mobility, the education loan scheme comes in to focus in order to raise access ratio in higher education. This paper is a humble attempt to review its growth & performance during the period 2004-10 through a case study of scheduled commercial banks in Chandigarh(2007); to enlist deficiencies in the scheme and suggest some policy options in this regard. The main conclusion of the study is that the scheme is run purely on commercial basis and does not offer any soft options for the meritorious and the needy. Key words: Education Loans - priority loan advances - Education Loan Schemefeatures & deficiencies-policy options and strategies

INTRODUCTION One of the most important objectives of government policy since the nationalisation of fourteen commercial banks in 1969 and that of six commercial banks in the year in 1980 was to extend and expand credit not only to those sectors which were of crucial importance in terms of their contribution to national income and employment, but also to those sectors which had been severely neglected in terms of access to institutional credit. The sectors that were initially identified for this purpose were agriculture, small industry and self-employment. These sectors were to be accorded priority status Sri Krishna International Research & Educational Consortium

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Volume 1, Issue 1 (2010)


in credit allocation by the banks. The commercial banks were advised to grant at least 40 percent of their total advances to the priority sector comprising of agriculture, small scale industries, small road and transport operators, retail trade, small business, professional & self employed persons, education etc. Under the priority sector advances, Education loans include loans and advances granted to only individuals for educational purposes up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad, and do not include those granted to institutions.

Making education loans accessible to a wide section of students has been one of the priority areas of Government of India. Today around 18 lakh students all over India are enjoying benefits of education loans and education loans worth Rs. 16000 crore have been disbursed to the needy students, according to the Finance Ministry. Forty percent of total advances of the commercial banks are advanced to the priority sectors like agricultural loans, small scale industry, etc. Education loans also form a part of these priority sector advances of the Public Sector Banks, as higher education has gained significance all across the world in the knowledge era and in these times of globalisation. Moreover, India has comparative advantage in the higher education field. Therefore, the responsibility of the Government of India becomes larger as user charges in higher education have been increasing in the post-reforms era especially due to mushrooming growth of higher...
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