Saturday, October 17, 2009

Not loansome on foreign campuses

The prospects of getting a job out West may be bleak at the moment, but this hasn’t cowed the spirits of Indian students looking at taking a loan to fund their studies abroad. On the contrary, Indian students seem to have become bigger and bolder in their demands this year, approaching banks for loans which are sizably higher than those disbursed in the past. They also seem to be more willing to take the road less trodden and to move beyond traditional geographies like the US and UK as well as in their choice of courses.

While most banks maintain that the number of overseas loan applications have largely matched up to what they were before the slowdown, the difference this year is that that many students have approached them for loans whose ticket sizes are larger than the maximum limit sanctioned by the banks themselves. “Previously a large number of foreign study loans used to be with the Rs 7.5 lakh range. Now the demand seems to have gone up to Rs 20-25 lakh and occasionally even Rs 30 lakh, which is beyond the bank’s maximum limit of Rs 20 lakh” says an official, from the corporate office of Syndicate Bank. Given the trend in the market, the Oriental Bank of Commerce(OBC) raised its maximum limit for overseas education loans from Rs 15 lakh to Rs 20 lakh about a year ago. Meanwhile, the State Bank of India, which is the largest lender in the country in terms of issuing education loans, slashed interest rates for education loans, sanctioned between May and September this year.

Another trend that bankers have observed is the increasing interest that Indian students are showing in countries like Australia and New Zealand, which have proved to be slightly cheaper in comparison to an established education hub like the US. At Syndicate Bank for instance, while Australia topped the list in terms of the number of loans disbursed, the largest loans in terms of size were disbursed for education in the US.

There are some programmes which elicit a higher level of caution among sanctioning loans. “Banks have been cautious of lending for pilot courses as well as air hostess training courses,” says SC Sinha, executive director of Syndicate Bank. Despite the large scale layoffs and the dismal employment situation in banking and financial institutions in the West, most banks say that they are still sanctioning loans for foreign degrees in finance and management. The Syndicate bank official, however, claims that while they have seen no change in policy in terms of lending, banks are generally cautious with regard to education loans.

This article is written by Lisa Mary Thomson for The Economic Times (October 11, 2009).

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