Banks are calling, but companies are not

Banks are calling, but companies are not
Comment E-mail Print Share
First Published: Mon, Mar 02 2009. 12 12 AM IST

 Tight spot: Students at Shri Balwant Institute of Technology in Sonepat, Haryana. India churns out almost 500,000 engineering graduates each year, only 25% of whom are considered industry-ready or ‘e
Tight spot: Students at Shri Balwant Institute of Technology in Sonepat, Haryana. India churns out almost 500,000 engineering graduates each year, only 25% of whom are considered industry-ready or ‘e
Updated: Mon, Mar 02 2009. 12 12 AM IST
New Delhi: As the first engineer in his family, Venkat took out a Rs2 lakh loan to study electronics and communication engineering at Prince Shri Venkateshwara Padmavathy Engineering College in Chennai. Five years later, the bank is calling, but companies are not.
“Four years back, I was thinking I would go into IT (information technology) since companies were flocking to engineering campuses,” says Venkat, who finished the course in May, and asked that his last name be withheld so that it doesn’t jeopardize his chances with prospective employers.
Tight spot: Students at Shri Balwant Institute of Technology in Sonepat, Haryana. India churns out almost 500,000 engineering graduates each year, only 25% of whom are considered industry-ready or ‘employable’. Madhu Kapparath / Mint
Without a placement in his field, and with Rs5,000 per month loan payments due to begin in May, he says he took the only job he could find—a Web analyst position that pays Rs8,000 per month. “If education is costing much more” than the salary it produces, he says, “I don’t see the purpose of it.”
As the downturn forces IT companies to scale back campus recruitment, and defer or cancel joining dates of new hires, last year’s graduates from engineering colleges outside the top tier of educational institutions find themselves out of work, and with loans to pay off.
India churns out almost 500,000 engineering graduates each year, according to estimates by the IT industry’s trade group, the National Association of Software and Services Companies (Nasscom), yet only around 25%—those from the top institutes and those at the top of the average ones—are considered industry-ready or “employable” when the degrees are awarded.
In boom years, firms would keep large benches of workers on stand-by to staff projects on short notice, and the supply of graduates couldn’t match the boundless appetite of tech firms for fresh recruits.
Engineers from lesser known institutes could also secure offers. Now that most large employers have dramatically tightened hiring and cut training budgets, graduates from the second tier of institutes are the first to suffer.
“Many of my classmates have taken loans for B. Tech fees, and now don’t have offers in hand, and need to tell banks to wait,” says Deepak Gupta, who graduated from HMR Institute of Technology and Management, which is affiliated to Guru Gobind Singh Indraprastha University in New Delhi. Of the 60 students in his batch, around two-thirds didn’t get placements, he says, while around 10-15% of them had taken loans of around Rs2 lakh to cover college expenses.
Another HMR graduate, Rahul Gupta, took a Rs2.5 lakh loan to pay for college, but didn’t get any offers after graduating in September. He got his loan period extended by three months and took a Rs17,000 per month job at a call centre so he could start paying it off, but the Rs12,500 per month payment he was expected to make will take up about 70% of each paycheck.
Government banks are only allowed to take 60% of monthly salary for a loan repayment, so Gupta has yet to flesh out the terms with his bank. He says he is considering switching his career goals from software to banking. “I want to go to IT sector but don’t have a choice as of now, because there are no jobs available,” he says.
HMR’s placement adviser, P.N. Avasthy, says while many graduates did receive offers, the economic turmoil has affected some. “Sometimes they go for management courses or post graduation, or foreign admission, but by and large, many are interviewed and promised jobs,” he says. “The intent letters are there, but they are waiting for proper placement, date of joining and all that.”
A large chunk of the 2008 batch at Vasavi College of Engineering in Hyderabad are still waiting for their joining dates, including 78 graduates hired by Wipro Technologies, according to C. Madhava Rao, who heads placements at the college. Vasavi also opened the 2009 placement season to last year’s graduates who are still unemployed, and replaced around 20 graduates, Rao says.
Most engineers who graduated in 2008 at Cummins College of Engineering For Women in Pune have started working for the companies that recruited them, though some had to take less-than-ideal jobs, according to the college’s training and placements officer, Rohini Kothari. One student, she says, had loan repayments due and had to accept an offer that paid Rs12,000 per month, contingent on a successful three-month trial period at Rs6,000 per month. The average salary of a Cummins graduate, Kothari says, is around Rs30,000 per month.
The banks haven’t experienced major problems yet with education loans, since payments often begin only one year after graduation if the student hasn’t found a job.
Satinder Kalsy, who looks after education loans at Punjab and Sindh Bank in Delhi, says that while he hasn’t had to restructure any loan repayments yet, he anticipates working with some students to increase repayment periods (and decrease individual payments) or increase collateral on some loans. There is a “downtrend in salaries and the market is sluggish”, he says. “There is quite a possibility.”
Those students who can afford to are taking additional classes. Deepak Gupta, who says he paid his college fees without bank loans, is currently enrolled in a three-month course that simulates live projects and builds soft skills at the IT training company, AlmaMate, a firm that guarantees a job upon completion of the course. After clearing all the interview rounds during college placements with four multinational IT firms, he says, he never got an offer letter from any of them.
“This year is going to be a very tough year for college graduates,” says AlmaMate’s managing director, Kamal Mansharamani. “2008 has been tough, a lot of companies cancelled offers, or deferred. Still there are a lot of 2008 batch students who are without a job, and another 500,000 are going to hit the market.”
Responding to last year’s poor placements, banks have also started tightening up standards for education loans, with students with above average marks rejected, and others asked to mortgage homes in order to receive aid.
Outstanding education loans grew at an annual rate of 37%, to at least Rs26,000 crore, as on 19 December, the latest Reserve Bank of India data shows. The figure for the previous year had crossed 45%.
Mansharamani, who started AlmaMate three months ago to make engineering graduates from tier II and III institutions more attractive, says the root of the problem is in a mismatch between what the colleges teach, and what the industry needs. “IT was growing at about 30% every year, and that growth translates into headcount growth since it is a services industry,” he says. “A lot of colleges have mushroomed because of this need, but quality has taken a big hit.”
Comment E-mail Print Share
First Published: Mon, Mar 02 2009. 12 12 AM IST