NPAs on student loans soar to 9.55% as jobs and income dry up

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Almost 9.55% of education loans granted by public sector banks were classified as non-performing assets (NPAs) as of December 31, the Union government informed on Monday.

Of the total outstanding education loans, 366,260 accounts worth ??8,587 crore went wrong, he said.

Experts said job and income loss rates and dropout rates after the covid epidemic were key factors in the increase in NPAs for this category of loan.

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The NPA rate for education loans in this fiscal year was significantly higher than in 2019-2020

The NPA rate for education loans was significantly higher than in 2019-2020 and is the highest of the last three years. NPAs for education loans were 7.61% in FY20, 8.29% in FY19 and 8.11% in FY19 on March 31, 2018, according to data from the Ministry of Finance. The category also experienced significantly higher NPAs than home, vehicle, consumer durable and personal loans, which ranged between 1.52% and 6.91% in fiscal year 2019-2020.

Loans granted for engineering courses top the list of educational sector ANPs with 176,256 accounts for an amount of ??4,041.68 crore goes awry as of December 31, 2020.

“There is a combination of factors that must have contributed to this surge. The financial crisis due to jobs and loss of income is a key factor. Also, the repayment of these loans, especially in times of economic downturn, is not a priority for people as they are largely unsecured loans. A banker cannot withdraw an asset in the case of a student loan because in most cases there is no mortgage, unlike, for example, a home loan, ”Narayanan said. Ramaswamy, Partner and Head of Education Practice at KPMG Consulting and Audit Firm.

“In a situation of loss of income and loss of employment, student loan repayments have taken a back seat to survival. In addition, students opted to postpone their studies and many had to drop out of courses such as engineering, contributing to the increase in non-performing assets, ”said KR Shyam Sundar, labor economist and academician.

Cases of students dropping out of vocational courses as a result of market, employment and education disruptions caused by the covid-19 pandemic must have contributed to the increase in bad debt cases for the category, Ramaswamy said.

States facing high levels of income and job loss and with a high density of engineering schools must have contributed to high NPAs, he said.

South India contributed over 65% of total NPAs for education loans, with Tamil Nadu alone recording NPAs of ??3,490.75 crore of the total ??8,587 Crore Student Loan NPA through end-December, according to government data. Of the state-specific outstanding education loans, 20.3% in Tamil Nadu and 25.76% in Bihar have gone bad. However, Bihar’s burden was much less than that of Tamil Nadu.

The central government had proposed a moratorium on loan repayments to borrowers, including those who took out student loans in the first half of 2020.

“It was a good move by the government, but by the end of the period the loss of formal sector jobs had become evident and this must have prompted the postponement of student loan payments by many and more. in addition to those who have given up, ”said Shyam Sundar. .

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