Education loans will count in credit ratings, says govt.

No exemption possible, Finance Ministry tells DMK MP

The government has clarified that education loan defaults cannot be kept out of the ambit of credit rating bureaus such as the Credit Information Bureau of India (CIBIL). The government’s response was in reply to a question posed by DMK MP Tiruchi Siva.

In a letter written to Finance Minister Arun Jaitley in August, Mr. Siva said student loans amounted only to 6.9 per cent of the total non-performing assets (NPAs), compared to industrial sectors such as steel that accounted for 36.4 per cent. He pointed out that in 2012-13, the All India Survey on Higher Education observed that around 37 per cent of the total education loans were taken by the Scheduled Castes, Scheduled Tribes and Other Backward Classess.

“Due to the growing NPAs of banks, they will become reluctant to provide education loans. The representation of education loans as NPAs affects the future of the students. This is a hindrance to the youth who want to set up their own businesses as they will not be able to take loans on account of non-repayment of education loan,” Mr. Siva said in his letter.

If the student loans are clubbed with other NPAs, they will be brought under Credit Information Bureau of India. A defaulter gets low CIBIL ratings and cannot get any further loans.

“Most of the student loans are very nominal amounts, ₹5lakh-10 lakh, more so if you compare it with the NPAs of our state-run banks running into thousands of crores, so the government should seriously deliberate on the issue,” Mr. Siva said.

In a brief reply, Minister of State, Ministry of Finance, Shiv Pratap Shukla wrote on October 23, “The Reserve Bank of India has informed that education loans cannot be exempted from credit reporting system as it is mandatory for banks to report credit information to agencies like CIBIL to ensure credit discipline.”

Tamil Nadu accounts for the maximum number of education loans in the country.

Source:-thehindu