| CEOs of large commercial banks will seek the support | | | | from RBI on classification of home loans up to Rs 30 |
| of the Reserve Bank of India to secure a | | | | lakh as priority sector loans. As of now, only loans up |
| government guarantee for education loans. They plan | | | | to Rs 20 lakh are treated as priority sector loans. |
| to raise this issue on Monday when chiefs of large | | | | Banks say the average ticket size of the loan has |
| commercial banks are slated to meet RBI governor D | | | | risen to Rs 30 lakh as property prices have risen |
| Subbarao, a fortnight ahead of the monetary policy | | | | sharply. |
| review due on April 20. | | | | Banks will also seek flexibility in treating loans to the |
| Mounting bad loans in the education loan segment is a | | | | road sector as secured loans. Since the land on which |
| key concern for most banks as 2-3% of total | | | | the roads are constructed belongs to the |
| education loans have become sub-standard loans. | | | | government and that it is for public utility, the land is |
| "Banks will request the central bank to take it up | | | | not pledged with banks. As a result, all loans given to |
| with the government to provide a guarantee, at least | | | | build roads are classified as unsecured loans such as |
| for loans below Rs 4 lakh," said the chairman and | | | | Personal Loan. Banks have to provide a higher risk |
| managing director of a large commercial bank on | | | | weightage on unsecured loans, making such loans |
| condition of anonymity. | | | | expensive even though they are infrastructure loans. |
| Students availing of education loans of less than Rs 4 | | | | Banks may also indicate to RBI to provide clarity on |
| lakh do not have to provide any security or | | | | the base rate — the new system of pegging |
| guarantee. Further, government-owned banks are not | | | | interest rate on loans, which will come into effect |
| able to reject or withdraw education loans. | | | | from July 1. Banks can choose to calculate the base |
| "The government has made it very clear that | | | | rate, taking into account the cost of deposits and |
| state-owned banks cannot reject any education loan | | | | profit margin. The central bank has given banks |
| unless they have a substantial reason to do so. If a | | | | freedom to choose deposit bracket and profit margin |
| loan is rejected, the student can directly approach | | | | instead of prescribing a uniform method for all banks. |
| the government (finance ministry), who in turn | | | | Banks expect RBI to indicate a standard deposit |
| directs us to approve the proposal," the chief of a | | | | bracket for all so that the rates are comparable. |
| state-run bank said. | | | | Most banks have said they will wait for policy cues |
| So far, state-owned banks have disbursed education | | | | from RBI in the April policy before taking any decision |
| loans aggregating Rs 32,000 crore to 16,98,601 | | | | on lending and deposits rates. Banks are also looking |
| students. As of now, only state governments such | | | | forward to the central bank's projection on credit and |
| as Karnataka and Maharashtra are providing interest | | | | deposit growth for this financial year. In 2009-10, RBI |
| subsidy on education loans. Even as the government | | | | has revised its credit projection twice — from |
| announced plans to provide an interest rate subsidy | | | | 20% to 18% and subsequently, it was lowered to |
| for weaker sections of the society, the scheme is | | | | 16% due to poor demand for credit. |
| yet to be implemented. Banks want the government | | | | RBI had signalled a higher interest rate by raising key |
| to guarantee all education loans across state. | | | | policy rate on March 19 — the repo and the |
| Besides education loans, banks will also seek flexibility | | | | reverse repo rate — by 25 bps each. |