Financing Futures

Educational loans is a lucrative sector for commercial banks but some students in Kashmir desirous of studying abroad find the bank officials “insensitive”. Sameer Yasir looks at the scenario. 

Iqbal Paray, 24, wanted to do his masters in Political Economy from London at the University of  Westminster. He got a scholarship that would only take care of tuition fee but not the living costs. So he applied for a loan at a bank in Srinagar. The bank offered the facility of education loans but he got stuck in the bureaucratic process and the information provided by the bank was not adequate. Ultimately, he couldn’t get the loan in time and lost a chance of studying in one of the prestigious universities of England.    

Most of the banks that provide educational loans in the state do not provide adequate information to the aspiring scholars. So, students most of the time get confused with the process of securing financial support and how to apply for a educational loan.
Statistics also bare this fact out and show that banks operating in Kashmir region have not been able to meet the annual targets of disbursing educational loans.    

For example, in Jammu and Kashmir in educational sector the banks as against the annual target of Rs. 68.12 crore in favour of 2,948 beneficiaries had disbursed a total of Rs.51.14 crore in favour of 2,852 beneficiaries by the end of March 2010. In the educational sector only Rs 22.88 crore were disbursed.

The reason behind the less numbers interested in taking the educational loans can be attributed to less information available here about the loans. The private banks outside the state have been able to effectively disseminate information to the customers that most students in India go to foreign universities only after availing the facility of educational loans.

“I was waiting for the day when I would get admission. But the bank couldn’t help me with the students’ loan, they ask for ridiculous papers that are not needed,” says Iqbal. “In Jammu my friends ware helped by the bank people to apply for the loan but here they will be harsh at every step. If you don’t have determination to fight on you wont get it.”

The banks operating in the Jammu and Kashmir do have a policy for providing loans to the students desirous to study in India or abroad. Although the rate of interest varies from one bank to another, the repayment schedule is almost the same for all banks.  The J&K Bank and State Bank of India are the biggest providers of the Educational Loans in the state. But private sector banks like HDFC and ICICI are changing the scenario in this segment.

The basic eligibility criterion envisaged under the J&K Bank education loan scheme is that the student should have secured admission to professional/technical courses or any other course covered under the scheme through entrance test or a selection process. He/she should have passed the qualifying examination for admission to the courses.

If the student intends to pursue his education abroad, he/she should have secured admission to foreign universities/institutions. Employed person intending to improve their educational qualification and/or receive training in modern technology in India or abroad can also apply for the loan under the scheme provided training offers prospects of better placement.

Sajad Bazaz of J&K Bank says “As far as scale of finance is concerned, the loan is categorized into two categories. For studies in India, students can borrow up to Rs 10 lacs. For studies abroad, a student can get financial assistance up to Rs 20 lacs. For studies in India, loans up to Rs.4 lacs are granted without margin. For a loan amount of above Rs 4 lacs to Rs10 lacs, the student has to pay five percent margin. For overseas loans, 15 per cent margin is to be paid.”

Repayment schedule starts after a repayment-holiday of 6 months to one year of the course duration. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum of two years. After this, the student has to repay the loan in 5 to 7 years through monthly installments.

The accrued interest during the repayment holiday period can also be added to the principal loan amount and loaded in the Equated Monthly Installments (EMI) fixed by the bank. This means, the borrower doesn’t have to make repayment during the remaining study period. However, the borrower can earn a concession of one per cent in rate of interest, if he decides to repay the accrued interest monthly during the entire study period.

But students complain of insensitive behavior by bank officials here.

“It is very difficult to get the loan. Even after the loan is sanctioned they don’t pay on time which sometimes results in the dismissal from the university,” says Amir Akhoon who wanted to do MBA in Delhi.


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