The bank’s website shows that students enrolled at the Massachusetts Institute of Technology, Imperial College London, the University of Oxford, Harvard University and the University of Cambridge can access collateral-free loans up to the new limit. Although SBI has not announced the higher loan limit and did not respond to an emailed query, consultants working with the bank said the limit was increased in November-December.
The cost of studying abroad may exceed 1 crore in tuition fees and accommodation expenses. Non-banking financial companies (NBFCs) and sector analysts said given that more Indians go to foreign colleges every year, other lenders are expected to do the same.
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“SBI’s decision to extend unsecured loans to select universities abroad is a progressive step that will significantly ease access to education financing for students. “The move is in line with the broader industry trend of increasing availability of unsecured loans,” said Ankit Mehra, co-founder and CEO of non-bank lender GyanDhan.
The government informed Parliament in April that more than 1.3 million Indian students were pursuing foreign education in 2024. Greater availability of big-ticket, collateral-free loans will help more students study abroad regardless of their family’s financial background and increase access to quality education.
Banks generally use the Model Educational Loan Scheme developed by the Indian Banks Association (IBA) to determine the eligibility criteria, quantum, security, margin and interest rate for study loans. loan up to No collateral is required for Rs 7.5 lakh, but parents must be joint borrowers with the applicant; For the above loan 7.5 lakh, not only does the parent need to be a co-borrower, banks also require “solid collateral security of suitable value”. Repayment moratorium of up to one study period and one year is allowed in all cases, and the loan can be repaid up to max. 15 years after the moratorium ends.
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However, in some cases banks are free to set their own loan limits, such as in the case of SBI.
Apart from SBI, HDFC Bank also gives education loan up to 50 lakh without collateral. According to HDFC Bank website, students can get loan up to 1.5 crores, and those looking for it can reach up to If they take admission in selected institutes then they can get 50 lakhs without guarantee.
Arjun Chaudhary, group executive and head of retail assets, payments and affluent banking at Axis Bank, said the private sector lender currently offers collateral-free education loans. Rs 1 crore to eligible students for admission into various prestigious institutes like Harvard, Oxford and MIT. “It is offered across the country for postgraduate STEM (science, technology, engineering and mathematics) and management programmes,” Choudhary said.
According to GyanDhan, average education loan size increased 32 lakh in FY22 40 lakh in FY2015, reflecting the rising cost of education and currency depreciation as well as higher loan limits. “With SBI setting unsecured limit 50 lakh, we expect this trend to continue in the coming financial year,” Mehra highlighted.
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Education loans of banks remained stable 1.3 trillion at the end of November, 17.5% higher than the same period last year, Reserve Bank of India data showed. Education loans constituted 2.3% of total retail bank credit during the same period. At 2.7% as on September 30, bad loans in education loans are higher than many other retail loan categories.
Banks charge higher interest rates on collateral-free education loans due to the increased risks associated with granting loans without any security against the loan amount. This higher interest rate compensates the bank for the potential loss if the borrower defaults on the loan. For example, SBI charges 10.15% interest for collateral-free student loans. up to 7.5 lakh more 50 lakh for those going to select institutions, while the interest rate on collateral-backed loans is up up to 7.5 lakh more Its website shows that ₹3 crore is 9.65% for similar institutions.
According to Suchindra Kumar, partner and leader, education, PwC India, demand for study loans from rural markets has increased, and banks are lining up with better offers. “However, one has to ensure that the risk profile of the borrower is taken into account. In many cases, families do not have a credit history, and their ability to repay loans in future may be affected,” Kumar said.
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America, Canada, Australia and European countries are the preferred destinations for students studying science, engineering and medicine. Both Australia and Canada have increased their intention to study abroad over the past year and a half despite curbing their student intake through tougher background checks and an increase in Guaranteed Investment Certificates (GICs). A GIC is similar to a secured investment, and serves as proof that the student has the means to live and pay expenses in the host country.
The fight for students will be more intense in smaller towns like Guntur, Ongole (Andhra Pradesh), Khammam, Warangal, Nalgonda and Karimnagar (Telangana) or smaller towns in Punjab and Haryana, where students generally go in large numbers. Foreign.
“If the unsecured collateral amount increases, competition among NBFCs and lenders will also increase. All are targeting smaller towns and tier-2 and 3 cities where penetration of student loans is higher,” said Akshay Chaturvedi, Chief Executive Officer. Said. Fly Finance is a service platform catering to the financial needs of students and education loans for studying abroad.
Financial sector watchers said more focus should be given to providing education loans to rural and semi-rural areas and those without good financial support.
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K., convener of the Public Awareness Institute Educational Loan Task Force. “Premier institutions somehow get students who have stronger financial aid than their peers,” Srinivasan said. Srinivasan said that as the cost of education has increased in India too, so have the banks’ approvals. Should give more loans without asking for high-value collateral.
“At the government level, more attention should be given to education loans, which seems to be lacking at the moment. One should view spending on students not as an expense but as an investment in future economic growth.”
