Dreams Indebted


For best education, lot of students seek admissions in Western universities. Some get scholarships and most of them approach banks for educational loans. Muntaha Hafizi visits the sector that had Rs 283 crore outstanding in June 2015


Students writing papers in Entrance Examinations to professinal colleges of Jammu and Kashmir in Srinagar on Saturday26, June 2010. photo by bilal bahadur
Students writing papers in Entrance Examinations to professinal colleges of Jammu and Kashmir in Srinagar on Saturday26, June 2010.
photo by bilal bahadur

After completing her high secondary from Kashmir, Anna, 29, made her tracks abroad. She wanted to study law from a foreign university, a passion since her teens.

The course fee at the University of Huddersfield, United Kingdom, where Anna had applied was Rs 44 lakhs. After managing most of it on her own Anna fell short of Rs 7 lakhs. “I didn’t want to lose this chance. So I took education loan for my admission from a bank,” says Anna.

In 2012, Anna graduated from the university, with a very different take on the education loans.

“It seemed more difficult than a housing loan. Last time the bank withdrew Rs 50,000 from my father’s account, without any prior notice,” says Anna.

Anna’s dad was her co-borrower when she opted for the loan. Every applicant who applies for a loan up to Rs 10 lakh, needs to have a co-borrower, who acts as a guarantor to the applicant. If the amount exceeds Rs 10 lakh, a mortgage is kept as a security.

Anna, however, complains that despite successfully completing her moratorium period, she is facing a lot of trouble. Moratorium period (time between course period and repayment), often lasts for maximum 12 months, where simple interest is paid, after which repayment of principal amount starts which is for 7 years maximum.

“I wouldn’t recommend anybody to take education loan in Kashmir, if its prospectus didn’t improve. It’s very different than what they advertise,” says Anna.

Anna currently works as a Human resource executive at Bharti Airtel telecommunications. She got her job after 2 years of her degree. Prior to that she worked at other random places. “I didn’t get a proper job instantly, so repayment was a big trouble,” says Anna.

Financing ones education through a loan needs a slow and a well planned consideration. Anna couldn’t recover the amount with ease, but there are many who have been successful in repayment of the loan taken.

“I took a loan of Rs 2 lakh, and I had pre-planned how to pay back, so in a couple of months I repaid. And it depends on your financial condition,” says Saquib Murtaza.

Saquib is currently working as an accountant in state government. A gold medallist from SKUAST, Saqib aspired to undertake Master’s in Forestry from University of Huddersfield, UK. “I received an 85 percent scholarship on my Rs 11 lakh fee, because I was a topper,” says Murtaza.

For the remaining Rs 3 lakh Murtaza applied for an education loan. After applying for a loan, he had to wait for a couple of months to get it sanctioned. He laments on how the system has turned bureaucratic.

“I had to look for someone influential to get my loan sanctioned. It’s your status that matters to them, not your intelligence,” says Murtaza. He adds laughing, “Nothing happens without recommendation in Kashmir.”

Murtaza had to wait for a month, to know the status of his loan. However, after a proper recommendation, he was helped in a couple of days.

“They say, apply and we will come to your homes. It hardly happens, and if it does, it’s for those who are economically sound,” says Murtaza.

This idea of “Banks will be at your doorstep” varies across different banks in Kashmir.

“We don’t deny loan to any student who meets all the parameters. Despite of their financial status, we extend loans to them,” explains a branch head of J&K Bank.

The basic documents required for the student loan is an admission letter, fee structure of the college, a guarantor and the basic certificates (D.O.B, state subject, last exam passed).

However, there are banks, whose first preference is to gauge the employment potential of the student.  Fearing default, certain banks are reluctant to extend loans to the students.

“There are cases where interest is not paid in between the moratorium period. And bank has to suffer a huge loss,” says Muzaffar Ahmad, manager, State Bank of India (SBI).

If the monthly amount is not paid in 90 days, the bank classifies it as NPA (a non performing asset,) wherefrom a proper inquiry is held.

“We give loan as per a priority list. We have classified our priority list in three sections: A – For IIT’s, B – NIT’s, and C – other. We do a proper assessment to see where our money could stay secure, and where could the chances of placement be high,” says Muzaffar Ahmad. “We don’t provide any loan for any sort of donations, it’s only meant for admissions.”

Whereas SBI provides education loan at 13.2 percent interest rate, it is 11.5 percent in J&K Bank’s case. The rate of interest varies across different banks.

SLBC each year forms a credit plan which all banks have to follow. There are branches which have not yet received a single application for the education loan.

“We started since last year but nobody came as such. So it’s difficult to achieve the target of Rs 37 lakhs for his year,” says Muzaffar Ahmad.

Education falls in priority sector but strict rules for liquidation and less awareness, has barred banks to meet their set targets, and has led to poor performance of banks under education sector.

Besides, to strength Monitoring Information System (MIS), education sector is now appearing under both Priority as well as non-priority Sector with specified ceiling, since March 2013.

Year Target


Target (Rs Cr) Achievement (No) Achievement (Rs Cr)
2011 3544 80.75 3278 63.17
2012 4686 151.36 4096 67.69
2013 6447 208.10 4556 78.65
2014 10916 417.52 4358 80.02
2015   541.78   93.81

The table shows that there has been a decline in both, financial as well as physical terms in education sector. As per the SLBC report, the advances to Small Enterprises sector dominate the priority sector, with the lowest share going to Education Sector since last 5 years.

“Students are less aware about the education loan. This is marketing for us, why won’t we give loan,” says Roohi, an Associate Executive, loan sector, JK Bank.


Multiple consultancies work in Kashmir, to help students get aware of the education loan and recruit them abroad.

“We help them with scholarships, and to consult banks in case they opt for an education loan. For 30 percent of the total amount taken, they get a maximum of 15 year period to repay the amount,” says Runum Mir, a consultancy head.

As per her survey, in Kashmir, almost 50 percent of students opt for education loan to get an admission in Masters Degree at a foreign university.

Not aware of special schemes, in education loans, students as well as banks are at a loss.

SLBC in its previous meetings observed that despite high appetite and zero rate of rejection of cases the education sector is not picking up and needs serious introspection, and banks need to give wide publicity by highlighting the salient features of the schemes among the general masses of the State so that the benefits of these schemes gets Percolated to various sections of the society.

“I didn’t know about the special schemes provided on education loans. I think it would have been a little easier for me to repay,” says Nighat.

Nighat, 23, is doing her master’s from SKAUST. Coming from an economically weak section, she had opted for a loan of Rs 2 lakhs.  “They told me that I would have to give the principal amount after I get a job, but now they are taking both interest as well as the loan amount,” says Rumaisa. “It was better if I had asked a relative or a friend.”

For girls like Rumaisa, 11.5 percent interest rate is too much to pay. Even the girl child scheme that extends loan on 11 percent interest is too lofty for underprivileged and downtrodden.

“’I appeal that there is a relaxation, so that students like me who are on their own could pursue their studies without stress,” says Nighat.

However, for students with disabilities, banks have pledged to provide loans at an interest rate of 3.5 – 4 percent per annum, wherefrom they can either pursue their studies in India, or abroad.

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