Abstract
Education financing is a key retail banking product for most commercial banks and a lifeline for large numbers of students seeking professional courses. This study aimed to identify the impediments in the successful delivery of this loan product in India, where it is marketed majorly by public sector banks under a common scheme devised by the government. The study adopted a qualitative approach to probe behavioral issues related to the credit appraisal process, which is the most suitable approach for unstructured exploratory design. Since credit managers in banks work with applicants for education loans, their insight becomes essential to understanding the issues plaguing with the smooth implementation and delivery of this scheme. Thus, ten public sector bank managers working in different geographical locations were selected using a homogeneity purposive sampling technique. The study collected 41 responses, which were then divided into 4 major categories. The responses were simultaneously transcribed manually to ensure that data remained close to the original verbatim of the participant. All transcribed interviews were imported into ATLAS.ti 8 Software for analysis. The 4 observational categories lead to a broad understanding that product accessibility, operational hurdles, scheme features and limitations in bad loan recovery are key bottlenecks in managing education loans. These responses had over 80% commonality on key issues of product feature and cost. It was concluded that education financing can perform better by improving access, rationalizing interest rates and liberalizing repayment terms. These findings can be used as input for tweaking the product for better performance.
Highlights
In their pursuit of financial sustainability, higher education institutions across the world, including India, are always pushing for higher course fees and making it difficult for average middle-class students to enroll in technical courses without the help of bank financing
Education loans in India have traditionally been targeted at meritorious students from middle and lower class financial status, and the product has been designed around the model education loan scheme of the Indian Banks Association (IBA)
Interviews with the respondents selected using homogeneity purposive sampling brought out four major categories of impediments beleaguering the education loan delivery by public sector banks
Summary
In their pursuit of financial sustainability, higher education institutions across the world, including India, are always pushing for higher course fees and making it difficult for average middle-class students to enroll in technical courses without the help of bank financing. Education loans in India have traditionally been targeted at meritorious students from middle and lower class financial status, and the product has been designed around the model education loan scheme of the Indian Banks Association (IBA). Under this scheme, interest gets accrued during the course period and is capitalized with the repayment starting from one-year post completion of the course. Some banks offer collateral-free loans up to a higher limit for admission into courses offered by certain categories of premier institutions.
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