Mumbai/Bengaluru: A weaker rupee is making educational loans more expensive for parents looking to send their children overseas. Given that the rupee has weakened from Rs 68.5 to the dollar in July 2019 to almost 72 this week, the additional burden would be almost Rs 1.4 lakh for a student paying $40,000 tuition fees.
Bankers said they have had to come up with new schemes to meet rising demand. "Under the Pradhan Mantri Vidya Lakshmi Karyakram, the maximum limit for giving overseas education loans is Rs 20 lakh. But, education in the US is expensive and parents have started putting in requests for loan amounts of Rs 60-70 lakh," said Corporation Bank, MD, P V Bharathi. "To cater to this, last month we launched a new product Vidya Plus, which makes a larger ticket size of loans possible."
SBI is the only public sector bank with a limit of up to Rs 1.5 crore under its Global Advantage Education Loans.
Banks said that they do not envision fresh defaults in overseas education loans due to the weaker rupee. Although non-performing assets in education are high at 15-25% for public sector banks, they are in the Rs 1-4 lakh unsecured category. "The overseas education loan category is fully secured. We usually secure the loan with a mortgage of property belonging to the parents. We have raised the limits on education loans from Rs 20 lakh to Rs 50 lakh due to the weaker rupee," said Canara Bank MD, R A Shankaranarayanan.
While parents feel the pinch, bankers say that a weaker rupee would be a problem only if it falls for more than a year. "If things improve on the export and domestic market front, then it may not prove that much of a problem," said SBI CGM Abhijit Majumder.
The depreciating value of the rupee over the last one year will also impact repayment abilities if the loan has been taken overseas, said financial institutions. "That means, if that student comes back to India to work, then that student would have to worry about the currency movement for a very long period of 10-15 years until that loan gets fully repaid," said HDFC Credila co-founder and CEO Ajay Bohora.
Source : The Times Of India