The country's largest lender, ICICI Bank, has been hesitant in increasing its education loan portfolio.
Even as the public sector banks are being encouraged to provide more and more education loans, ICICI Bank has decided not to expand its portfolio under this segment.
"The bank was hesitant to get into increasing quantum of educational loans because it was difficult to handle the same in the context of the collection," Mr. K V Kamath, CEO ICICI said at the 14th AGM held at Vadodara last month.
The bank prospects additional opportunities in corporate business as compared to retail, hence this decision. "The growth in the retail business has been impacted by higher levels of interest rates and property prices in cases of mortgage loans," Kamath added.
At present, education loans carry an interest rate of about 12 per cent.
Earlier in the month, the finance minister Mr. P Chidambaram had said that India was the only country where education loan was given on such a large scale, to about 14 lakh students. Loan amounts close to Rs 20,000 crore had been given under this section last year.
A growth of 35 per cent was noted in this segment from March 2007 to March 2008. As on 31st March, 2008, the total outstanding education loans stood at Rs 20,547 crore against Rs 15,209 crore as on March, 2007.
In the coming times, education loan portfolios are expected to expand more as education costs in the country are rising day by day.
According to an industry chamber survey, school expenses for a single child, excluding tuition fees, have shot up from Rs 25,000 to Rs 65,000 per annum since 2000. This has prompted parents to start planning their child's education at an early stage.
The government has taken several steps to make education loans reachable to the students from weaker section of society.
One of the major problems faced by these students is the collateral and co-applicant clause attached with education loans in the country.
Almost all the banks demand collateral, such as property or fixed deposits, if the loan amount exceeds Rs 4 lakh.