New Delhi: An ambitious scheme to make higher-education loans more attractive to poor students has failed to achieve its target because of inadequate marketing and the lack of coordination between various agencies.
The scheme was launched in 2010 by the human resource development (HRD) ministry and gives full interest subsidy (a student will not have to pay the interest for the loan he or she avails) to students from families earning less than Rs 4.5 lakh a year.
The interest subsidy is valid for the length of the course the student is enrolled for as well as a moratorium of either one year or six months after employment, whichever is earlier.
An HRD ministry document says that only 40% of the budgeted amount was used in FY2011. “In the previous financial year, a total of claim of sum of Rs 203.28 crore was reimbursed to Canara Bank out of the total budget of Rs 500 crore,” says the document, a copy of which has been reviewed by Mint.
Canara Bank is the nodal agency for the subsidy scheme, following a decision by the Indian Banks’ Association. Other banks lending to students under the scheme can claim the subsidy from Canara Bank, which in turn gets reimbursed by the HRD ministry.
The HRD ministry has allocated a budget of Rs 640 crore this fiscal for the subsidy scheme.
“Proper utilization of the fund requires coordination among banks, state governments and the HRD ministry,” the ministry note added. A HRD ministry official said the scheme has not received enough attention because of poor awareness and lack of support from banks and state governments. “Till recently less than 15 states have notified a designated authority who can give students an income certificate,” the official said, requesting anonymity. He refused to name the states.
The official added that though interest rates on education loan are higher than those for vehicle and home loans, some banks hesitate to sanction education loans, branding them “risky”. Another official in the HRD ministry said the ministry has informed the finance ministry and IBA about this and “hopes to see a better result by the end of this year”.
India wants to increase its higher education enrolment by nearly 30 million in a decade. Currently around 15 million studying for college degrees in India, around 12.4% of those eligible. Of these, less than one- tenth take student loans, according to official data.
Geeta Bhukal, education minister of Haryana, said the scheme is good but it needs wider publicity. “Many don’t know how to avail (of the loans). The publicity has to be much more prominent,” she said. However, the minister said that she is not sure whether her state has notified any designated authority for the scheme or not. “I need to check it.”
An official with Central Bank of India said that many states are yet to notify a designate authority for issuing the income certificate, which is posing problem. “It’s a cumbersome process to lodge claims as all the data has to be collated from all the branches by the central office and then passed to Canara Bank,” he said, requesting not to be named as he is not authorised to speak to media.
A Canara bank official, who too did not want to be named, said the figures are provisional as they had given banks’ time till 31 August to claim the subsidy. “We are providing sufficient publicity but the main issue is that many of the states are yet to notify the authority who can issue the income certificate to the eligible candidates”, he said. “We are still collating the data and the final amount could be more than Rs 200 crore”, he added.
A finance ministry official said his ministry has asked “banks to promptly inform loan seekers meeting the income criterion that they are eligible for the subsidy. Most banks are doing it. But there are a few instances where this is not happening.”