CHENNAI: Dream jobs are hard to come by these days and to enable students who wish to pursue their master's or professional courses with the help of educational loans, banks are considering extending the time for repayment of such loans. Of course, there are likely to be no waivers, but, yes, the initial moratorium period is likely to be extended. This will, in some cases, mean that students can repay loans over a ten-year period.
Banks and financial institutions extend loans to students desirous of pursuing professional courses in India and abroad. While no security is required for a loan of up to Rs four lakh, a collateral has to be furnished for a loan exceeding that figure. The repayment period usually commences 12 months after completion of the course or six months after securing a job, whichever is earlier. The term of repayment ranges from five to seven years and is on an EMI (equated monthly installment ) basis.
The IT boom had resulted in engineering and management courses being top draw among students. However, such courses cost more in terms of fee and students were forced willy-nilly to take loans. Banks cashed in on the opportunity by offering easy-to-obtain loans, complete with online forms and stalls in college campuses during admission time. They also offered loans for new fields of study, such as tourism and hotel and catering technology. Loan disbursements usually peak during the third quarter (July-September).
This year, with students not getting jobs easily and instances of job offer letters being withdrawn, banks have started restructuring certain educational loan accounts by extending the moratorium period. "Our bank has undertaken re-phasement (extending the repayment period) of educational loan accounts, only where specific requests have been received," says M S Sundara Rajan, chairman and managing director, Indian Bank. The bank has already re-phased 7,801 accounts- the total amount outstanding in these accounts is Rs 99.24 crore."Whenever student borrowers have expressed genuine difficulty, we have allowed re-phasement of accounts with an extended repayment period," adds Rajan.
The Central Bank of India, for instance, has increased the tenure of repayment on certain educational loan accounts. "We have extended the moratorium period on these loans so that the EMI gets reduced," says a senior official from the bank.
Of late, banks have been receiving several queries regarding restructuring of loans from students, mainly from engineering graduates. "Most students, especially those who want to get into the IT field, have been witness to job offer withdrawals in recent months. As lenders, we are proactive to the situation. We have received some queries on restructuring of educational loans and we will proceed on a case-by-case basis," says S Balasubramanian, chairman, City Union Bank.
"We will be taking a call on revision of interest rates on educational loans soon. After all, it is in the interest of the bank that the customer has adequate cash flow to manage his liabilities," says K Venkataraman, chairman and chief executive officer, Catholic Syrian Bank.
Source:The Times Of India