Education loans see record 20.6% surge in April-Oct

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Education loans registered a record year-on-year growth of 20.6 per cent at ₹1,10,715 crore in the current financial year till October compared with ₹96,853 crore in the year-ago period.

According to Reserve Bank of India (RBI) data, spurt in education loans was the highest in the last five years.. The growth registered in the comparable period was 12.3 per cent FY23 and (-) 3.1 per cent in FY22.  

Factors driving the spurt

The increase in demand was driven by many factors. “Low base and revival of offline campus courses in India as well as abroad has been driving the fresh and pent-up demand for education loans,’‘ Bibekananda Panda, Senior Economist, State Bank of India told businessline. 

For the last one year, foreign education loans with an average ticket size of ₹40 lakh-60 lakh accounted for nearly 65 per cent of loans disbursed.

Moreover, the recent action by the RBI in tightening the credit to some of the retail segments by increasing risk weights for banks as well as NBFCs have spared education loans. “This may support the flow of credit to the sector in the forthcoming months,” Panda added. 

Our enquiries with banks revealed that loans for education in the US are on the higher side. The US Embassy and its consulates in India issued a record 1.40 lakh student visas between October 2022 and September 2023 this year. “A good number of these admissions are supported by education loans, which also pushed up the portfolio for banks,” said a senior official of Union Bank of India. 

The hassle-free loan application and disbursal process is also among the factors that are driving growth in the loan portfolio.

NBFCs are also quite active in the segment. Some of them, including HDFC Credila, are offering education loan upto ₹50 lakh without collateral and the process is entirely digitised with Video Know Your Customer (KYC) and speedy disbursal within a week from the date of application.

According to data of rating agencies, education loans of NBFCs grew 100 per cent (in Assets Under Management) in FY23 compared with previous year.