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N.S. Vageesh

Bank officials said repayments on educational loans come in faster than the disbursements that they are able to make.

Chennai , July 15

G. RAMESH Kumar, a teenager who secured the 2,973 rd rank in the Tamil Nadu Professional Courses Entrance Exam (TNPCEE) was desperately looking for a way to finance his engineering course in a private engineering college.

The cost for the four-year course would be around Rs 2 lakh - moderate by the standards set in other parts of the State or the country — but still beyond the reach of his father, a job typist who did work for the many lawyers who circulate opposite the Madras High Court.

Mr F.R. Shaeraff, Director of Extension Education (Tamil Nadu Veterinary & Animal Sciences University), got a bolt from the blue recently. He was being asked to pay a fee of Rs 1.7 lakh at short notice for his son, doing his third year engineering course in a private engineering college in Mangalore. He was not keen on approaching relatives for this sum but the call from his son was naturally urgent.

For M. Amarnath, who finished an MBBS degree from Stanley Medical College, Chennai, in 2002, the immediate goal was to do a Masters in Public Health in a US university. But the one-year course would cost something close to $16,000 or nearly Rs 8 lakh (inclusive of living expenses and tuition fee).

For Ramesh Kumar, Amarnath and hundreds of anxious parents such as Shaeraff, there was some relief at hand this Sunday through the SBI Education Loan Festival. Spot clearance and zero processing fee saw crowds thronging the seven centres in Chennai where this loan festival was being organised.

Sanctions at the Adyar branch in Chennai city alone touched Rs 4.2 crore on Sunday. Bank officers said that this was more than what the branch had sanctioned during the whole of last year.

The educational loans come at an interest rate of 10.85 per cent for loans up to Rs 4 lakh and 11.85 per cent for loans above Rs 4 lakh. A moratorium covering the course period and one year thereafter normally saw repayment being done in between 5 and 7 years. Bank officers said that this however applied mainly to domestic educational loans.

"In the case of loans given for studies abroad, the customer is usually able to arrange for a teaching assistantship or an alternate part-time job which provides him or her sufficient means to repay the loan even during the moratorium period," said a bank officer.

For instance, K. Aishwarya, a borrower from SBI to the tune of Rs 3 lakh for her MS (Computer Science) course in the US, managed to send in Rs 1.6 lakh within a year of her reaching the US although she could take another two years to begin repaying.

There were many other cases like this. Bank officials said repayments come in faster than the disbursements that they are able to make. " They do not allow the portfolio to grow!" was the light-hearted complaint of an officer.

What was the alternative fund raising option, if the loans had not been available?

Ramesh Kumar said that he would have approached charities and foundations for grants and scholarships. Mr Shaeraff said: "The only alternative was to close a few fixed deposits that I had with the bank and take a personal loan on the credit card. But that would have cost me 36 per cent interest!"

That is a pointer to where the next El Dorado may lie for banks after the housing loan boom.

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