It has been reported that the defaults in the education loan in the banks are continuously rising. Due to the low salary in the beginning, students are facing problem in repaying back the education loan.
Last year the gross NPA of the education loan was about 5-8%. The Gross NPA of education loan has increased from 3.5% to 5.5% during the last fiscal year. CMD of the Indian bank stated that in order to control this they have asked the students and their parents to opt for restructuring of loans and get their repayment period extended. Bank officials stated that the students are facing problem because salaries of the students have been kept low and fixed at 23,000- 30,000 per month where as the other expenses and interest rates have hardened.
With the interest rate of education loan being 12% on amount of Rs 4lakhs, students need to pay an EMI of Rs 8,000 monthly. This seems to be great burden. Banks are trying to solve this problem and control the NPA. Besides providing the restructuring option banks are also offering a repayment holiday of six to nine months.