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LATEST NEWS UPDATES | Banks turn cautious on student loans -Sangeetha Kandavel and Sanjay Vijayakumar

Banks turn cautious on student loans -Sangeetha Kandavel and Sanjay Vijayakumar

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published Published on Jul 19, 2021   modified Modified on Jul 19, 2021

-The Hindu

There has been sharp rise in the NPAs amid COVID-19 pandemic

With unemployment rising, the ability of those who have taken education loans to pay back has come down sharply. As a result, the non-performing assets (NPAs) have increased in the last one-and-a-half years.

R. Nagarajan had taken a loan for his engineering course and started repaying it when he got a job at a start-up in the second half of 2019. In a few months, COVID-19 broke out and the start-up closed, leaving him and seven of his colleagues jobless. “I have not been able to repay the loan for over a year. And now I have a job with a lesser salary, and will have to close the loan soon,” he said. With the NPAs rising due to COVID-19, banks are very cautious.

According to data from CRIF High Mark Credit Information Services, the education loan market in Tamil Nadu grew to 20,200 crore in March 2021 from 18,600 crore in March 2019. The data also showed that NPAs, measured in terms of portfolio at risk (PAR) for 91-180 days, increased to 16.3% as of March 2021 from 15% at the end of March 2020. PAR is the proportion of loans overdue (for a specific number of days) to the overall loans outstanding.

A senior official of the Chennai-based Indian Bank confirmed that the number of NPAs in the education loan sector had increased substantially, compared with the pre-pandemic period, and attributed the increase to unemployment and under-employment. For Indian Bank alone, the NPAs increased about 17.2% to 1,197.51 crore as on June 2021 from 1,021.1 crore as on September 2020.

Even those who are seeking fresh education loans are finding it tough to get sanction. Parents of many students whom The Hindu spoke to said that after COVID-19 broke out, banks were reluctant to sanction loans, and some lamented that their reduced salaries did not meet the banks’ requirements.

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The Hindu, 19 July, 2021, https://www.thehindu.com/news/national/tamil-nadu/banks-turn-cautious-on-student-loans-as-npas-rise-amid-covid-19-pandemic/article35399848.ece


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