Debating India


Education loan? Forget it

Nandini Goswami

Saturday 7 February 2004, by GOSWAMI*Nandini

KOLKATA: 30k may be an attractive number for many IIM aspirants. Perhaps, not so much for commercial banks anymore. The executive decision has had a sudden impact.

By slashing IIM fees, the HRD Ministry has, may be unintentionally, taken the sheen off one of banks’ fast growing products - education loans, although the IIM segment of total bank edu loans may be very small in percentage terms.

Still, the days of banks hardselling education loans may just be over. Instead, they may now be forced to change marketing tack and go in for the emotional connect with customers of tomorrow - management students, instead of aggressively targetting them as good customers of educational loans.

The share of loans to IIM students may be small in the entire category of education loans per se for most banks. But bankers feel that the credit worthiness of the “IIM loans” are possibly the “best and most favourable” in the entire edu loan kitty.

ET talked to a host of banks to gauge the impact of the slash in IIM tuition fees from Rs 1.5 lakh to Rs 30,000. The common refrain was a definite decline in the demand and quantum of IIM loans. A massive slash in the ticket size of loans may not attract banks to go real aggressive at campuses.

The ratio of loan seekers for a regular IIM course has been pretty high. Estimates suggest that about 6-7 per 10 students generally go in for a bank loan. In most cases, the loan per student happens to be in the range of Rs 1.75 lakh to Rs 2 lakh.

Under the revised fee structure, a large section of the students may no longer need to seek a loan anymore, as a Rs 30,000 fee will be manageable for many and even a loan of such an amount would attract a low EMI. Most bank felt that once things settle down, there may be a rise in the number of loans.


The Economic Times, Saturday, February the 7th, 2004.

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