EXCELLENT INFORMATION.
On 17/01/2011, Education Loan Task Force <prpoint@gmail.com> wrote:
> dear members of India Vision, Action 2020 and ELTF members
>
> Some of our members have written expressing concern over the NPA under
> Education Loan and asking us to write about that also. This message will
> clear the myth that only edu loan borrowers are the alarming defaulters, as
> projected by few senior bankers and a section of English media.
>
> *Historical resistance to banks, when they lend to poor people*
>
> Whenever Banks are asked to reach the poor and downtrodden, historically,
> there used to be lot of debates among the senior bankers, intellectuals
> and English media, about the viability of those loans granted to the poor
> people. When the banks were nationalised in 1969, the so called
> 'intellectuals' made a big noise.
>
> Till 1980, Banking Industry did not reach the downtrodden much. When
> Janardhan Poojary was the Banking Minister under Indira Gandhi, he forced
> the banks to reach the poor and downtrodden, uplifting their economic
> standard. English Media and senior bankers were making huge noise at that
> time. Nothing has happened as feared by them. Even later in the
> Parliament, it was submitted that such irrecoverable small loans were only
> around 5%. The economic prosperity was larger.
>
> *Performance of public sector banks under Education Loan*
>
> Same way, till 2007, Banks were not showing much interest in the Education
> Loan segment. There were many brilliant students, could not proceed with
> higher education for want of finance. We have even seen brilliant boys,
> working in tea stalls. Till 2008, the total education loan outstanding was
> only around 16,000 crores, which was around 0.7 percent of total advances
> outstanding in the banking industry.
>
> Till four or five years back, Banks never bothered about granting education
> loan to poor students. They were demanding security and guarantors. Only
> rich boys and influential families were getting loans. Many of the Banks
> went to 'high profile' institutions and lent money to those students. Some
> of the students, migrated to foreign countries after education and did not
> repay. Even now, Banks are finding it difficult to trace such 'high profile
> and high educated' students. Please remember that many such defaulters are
> from affluent family and willful defaulters.
>
> *Recent growth in Education Loan*
>
> Only after 2008, Banks started lending for education in large scale, due to
> the pressure given by the then Finance Minsiter P Chidambaram. IBA also
> brought out a very good model scheme, which was adopted by all public sector
> banks. As at March 2010, the outstanding was around Rs. 360 billion
> (Rs.36,000 crores). spread over 19 lakh accounts. The total advances
> outstanding of Public sector Banks as at March 2010 was Rs. 24125 billion
> (Rs.24,12,508 crores). The Education Loan of Public sector Banks
> constituted 1.47% of the total advances.
>
> *Non Performing Asset (NPA) of Public Sector Banks - overall position and
> under Education Loan.*
>
> As at March 2010, gross NPA of the PSU Banks for the entire advances is
> only around 2.0%. In other words, it should be of the order of around
> Rs.50,000 crores, covering all advances.
>
> Education Loans granted after 2008, cannot become NPA, as the repayment
> starts only after completion of education and moratorium period. While
> discussing with the various bank managers, we also understand that in
> violation of the IBA guidelines, they force the students to pay monthly
> interest. (Interest can be paid after the completion of education, as per
> guidelines). If the students do not pay interest, they treat the interest
> component as NPA. This is in violation of the guidelines and inflate
> unnecessarily the NPA component of education loan.
>
> *NPA under Education Loan as at Dec 09*
>
> As at Dec 2009, Public Sector Banks have an outstanding of around 33,000
> crores. According to the data available with us, 637 crores, that is less
> than 2% are under NPA. The NPA position is at par with other advances only.
> Out of around 50,000 crores of Gross NPA, hardly around 700 crores form
> part of Edu Loan. This is also around 1.5% of total NPA of the Public
> Sector Banks.
>
> From the official information published, it is very very clear that 98% of
> the advances under Education Loan are not NPAs.
>
> We are not able to understand why the senior bankers and other intellectuals
> make huge debate through section of english media about the NPA of Education
> Loan alone. Generally, an impression is being created by them deliberately
> that poor people and small borrowers are dishonest and defaulters. while
> the big borrowers are trust worthy.
>
> Please see another alarming picture of the NPA level of the Banks, which
> will break the above myth created by intellectuals.
>
> *Shocking break-up of NPA in Public Sector Banks.*
>
> A couple of years back, one of the leading Banking Trade Unions AIBEA
> published a book giving the details about the 'willful defaulters' position
> in Public Sector Banks. As at Sep 2007. *2369 accounts, contributed 50% of
> NPA of PSU Banks, while the balance spread over 44 lakh accounts :(*
>
> As at Sep 2007, the total overall NPA of all the PSU Banks was around
> 39,000 crores spread over 44.2 lakh accounts. Out of this, 2369 accounts
> alone account for Rs.20,140 crores. That means nearly 50 percent of the
> Public Sector Bank's declared NPAs are locked up in just around 2369
> accounts and the balance of 50% in nearly 44 lakh accounts. AIBEA brought
> out the information, based on the data furnished by RBI and other
> authoritative sources. We wrote about this in India Vision Group, way back
> in March 2010 also.
>
> The book angered many of the corporates. Even today, if you look at the
> top 1000 NPA accounts of all the banks individually, it may constitute
> around 50 to 60% of the total NPA. The balance of NPA would be spread over
> lakhs of accounts. None of the banks, reveal this vital information, as it
> may cause embarrassment to many.
>
> *Rs.11000 crores sanctioned in few hours - SC ordered CBI enquiry*
>
> Even recently Supreme Court ordered a CBI enquiry on the information that
> some of the Banks have granted more than 11000 crores to the companies
> involved in 2G spectrum Scam. Surprisingly, such huge amounts were reported
> to have been sanctioned within few hours, without following any norms.
>
> *How Banks handle brilliant poor students when they approach them?*
>
> When poor students approach the public sector banks, they get lot of ill
> treatment. After the formation of ELTF, we are able to get the first hand
> information from the affected students. We were also able to sort out the
> difficulties in many cases.
>
> *Why bankers do not talk about 2369 accounts?*
>
> Sadly, the senior bank officials, who are giving frequently quotes in
> the English dailes about the 'alarming NPA' level of education loans, never
> talk about the 2369 accounts, in which around 20,000 crores are locked.
> Even the intellectuals, never discuss about this alarming situation in any
> platform.
>
> Private sector banks never participate in the social development. Hence, I
> am not writing about them in this message. I will write separately, about
> how private banks are functioning.
>
> *ELTF demands increase of Edu Loan to 7% of total advances*
>
> ELTF has been promoting that education loan component should raise from the
> existing 1.4% level to a minimum of 7% of total advances. This will help
> many brilliant and poor rural students go for higher education . This will
> facilitate to build a strong intangible national asset of education.
>
> We have already given suggestion to the RBI and to the Government (1) to set
> up a Credit Guarantee Fund and (2) to set up a separate institution for
> refinancing education loan like NABARD, SIDBI, IDBI.
>
> *Our submission to RBI and other Bankers*
>
> Through this mail, we appeal to all senior bankers not to spread a wrong
> message, as if only because of edu loan, the banking industry is suffering.
> Due to their half-hearted approach, they do not get connected with the
> young student borrowers and guide them properly. We have been suggesting
> all the banks to conduct 'education loan awareness camps', as they do for
> housing loans and car loans. Last year, when we tried, none of the banks
> showed interest on this.
>
> In addition, we have also been suggesting the banks to meet all the edu loan
> students once in six month and interact with them. They are going to be the
> future of this nation and the best loyal customers of those banks.
> Unfortunately, the bankers do not care for such constructive suggestions,
> instead spread false messages to the society.
>
> All the poor and small borrowers are not dishonest. We need to give a
> helping hand.
>
> Srinivasan
> Moderator, India Vision Group
> Convenor, Education Loan Task Force
> www.eltf.co.cc
>
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