Indian banks to extend repayment period for educational loans

In a move that is expected to ease the burden of students who avail loans for educational purposes, banks in the country are mulling extending the tenure (repayment period) to 15 years.

The present repayment period ranges from five to seven years for various banks, according to various media reports.

The longer repayment period would help the borrowing student, especially those who enrol in private professional colleges but are unable to get good job placements.

This is in line with the present eduction schemes in the UK, where repayment starts only when a student starts earning a predetermined salary, Indian Banks' Association (IBA) dputy cief eecutive K Unnikrishnan said.

This would also help banks, as extension of the repayment period will help in culling defaults as like in home loans, the incidence of defaults in small-ticket education loans is high, he said.

The outstanding loans of public sector banks for education as on 31 March stood at Rs43,074 crore, up from Rs 35,628 crore as on March-end 2010, in 22.35 lakh accounts, compared to 19.28 lakh accounts in the previous year.