Securing education loan for higher education under management quota is going to be difficult from now on. The IBA has asked all the banks not to give education loan for students admitted under management quota. This decision has been made by Indian Banks Association (IBA) while preparing the revised scheme for education loans, which will be introduced from the next financial year onwards. The decision was made on the wake of the increase in instances of nonpayment of educational loans by students.

No education loan for management quota students

IBA has further announced that the banks have the liberty to decide on the terms and conditions on the matter of education loans. The IBA has observed that loans given to students who are admitted under the management quota has reasonable chances of becoming bad since the employment potential of such students is much low. Currently the banks have reported a nonpayment of Rs. 1000 crore. The modified scheme will be introduced from the next financial year onwards after including the suggestions from the financial ministry.

What is management quota?

Management quota refers to the number of seats in education institutions other than government institutions, which is being offered by the management to the students on basis other than merit. The admission to the management quota seats will be in the hands of the management where students are selected by the management through criterions set out by them. The students admitted under management quota will not be selected based on the performance in the entrance examinations or marks they have scored in the qualifying examination. So the capacity of such students to secure jobs as other meritorious students are much less and as well as the probability of landing a good job is also less. This will impact the repaying capacity of the students admitted under management quota, which will lead to nonpayment. This is the reason behind the IBA’s decision to come out with such a directive.

Under the management quota, the students need to secure marks just required to pass and so IBA directive says that such students cannot be considered as meritorious.

Employability potential will also be considered

Even though the academic performance of the students will be the only criteria for providing education loans,in the case of students admitted under the same criteria, the IBA has for the first time asked the banks to give loans based on the employability potential of the student and course.

Borrowing limit

According to current education loan scheme, the banks can lend an amount up to Rs. 10 lakhs in the case of education inside India and up to Rs. 20 lakh in the case of overseas education. The students who borrow the amount need not have to repay the amount during the course of education plus one year. In some instances the banks have indicated that the employment potential of the students under the management quota will not be enough to cover its fee structure, as far as repayment is concerned. The students after one year of their studies will have 5 to 7 years to repay the borrowed amount

High Nonperforming assets a reason for the direction

Statistics shows that in the area of education loan, the percentage of nonperforming assets is 6% which is substantially high. The new scheme directs the banks not to take into account the financial status of the parents during the process of sanctioning loans to students who are high performers academically. The scheme aims at fulfilling all the expenses incurred during the course of study. The fees structure is highly dependent on the course selected, the institution, and even the state in which the educational institution is located.

Amount would not be sufficient

Since the banks will consider the employment potential while sanctioning education loan, there is high chance that the entire fee may not be sufficient to pay the fees.

Such a scheme may make it difficult to many of the meritorious students to avail bank loans for their education. So there is a widespread call from experts in the field of education to withdraw such a scheme. Many of them says that it is an injustice as the government has no problem in loans to business organization and in many people are asking why this cannot be extended to the students. Academicians say that there are academically bright students who secure admission through management quota. They observe that such a scheme would prevent such meritorious students from securing loans for their education.

Why nationalized banks?

Sources from private educational institutions say that this would make the objective of setting up nationalized banks meaningless. Some of them were irritated with such a scheme that discriminates students based on quota. Another concern is that while the government is trying for inclusive growth in the field of education, such moves will impact the outcome of the steps taken by the government. The IBA has formed a committee to bring about modification in the scheme with management quota under perspective. The committee is headed by TM Bhasin, Chairman and MD of Indian Bank.

Let all be equal in education

With rising concerns from different corners of the academic world and even various departments of the government, the government should reconsider the criterions included in the scheme so that every student will get an equal opportunity to secure education loans. With the introduction of such a scheme, there are high chances that meritorious students who are admitted under management quota for various reasons will be deprived of educational loans and that will be a grave mistake towards the student community across the country. Let us hope that the government will ask IBA to reconsider the scheme on the light of criteria such as not offering loan for students admitted under management quota. Let us hope that inclusive development in the field of education is not far away.