Education loan repayment term to be extended

Updated on: Tuesday, June 02, 2009

Chennai: Banks rendering educational loans are considering to extend the time for repayment of such loans and relax security norms.

Surely, these are likely to be no waivers, but, yes, the initial moratorium period is likely to be extended, resulting in the repayment of the loan 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 this amount.

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 priority of studies among students. However, the cost of the courses worked out into huge sums and as result students were pressed 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. The banks also came forward to offer loans for new studies, such as tourism and hotel and catering technology.

Recently, many banks have been receiving several queries regarding restructuring of loans from students, mainly from engineering graduates.

After the downturn, with students not getting jobs easily and instances of job offer letters being withdrawn, banks have started restructuring certain educational loan accounts by extending the moratorium period.

The Indian bank has already rephased 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 rephasement of accounts with an extended repayment period,' adds M.S. Sundara Rajan, Chairman and Managing Director, Indian Bank.

The Central Bank of India, for instance, has increased the tenure of repayment on certain educational loan accounts. The moratorium period on these loans have been extended so that the EMI gets reduced, according to n official from the bank.

S Balasubramanian, chairman, City Union Bank says, 'Most students, especially those who want to get into IT field, have been witness to job offer withdrawals in recent months. 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.'

Kalvimalar

Education loan repayment term to be extended

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