Dear Mr Srinivasan
As an Ex Banker of a PSU Bank, I fully endorse your views, pl let me know if I could be of any help in this Nation building initiative
we could set up stalls at all selection centres during the ensuing accademic year
Thanks and RegardsJohn Alex
Treasurer
ExNoRa International
mobile-9840434666
johnalex.saveearth@gmail
www.exnora.org
From: Education Loan Task Force <prpoint@gmail.com>
To: India_Vision_2020@yahoogroups.com
Sent: Mon, January 17, 2011 5:05:38 PM
Subject: [India_Vision_2020] NPA under Edu Loan vs NPA in Banking Industry - Facts not much publicised.
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
__._,_.___
Please visit the website http://www.indiavision2020.org to read inspiring articles of eminent personalities
.
__,_._,___
0 comments:
Post a Comment