At a time when rising defaults from education loans is haunting Indian state-run lenders, the government has asked banks to increase share of such loans in total credit portfolio.
Under pressure from the government, banks - that had turned reluctant to fund more students - have decided to revamp their education loan schemes by increasing the credit tenure and funding more than one person per family for loans up to 4 lakh.
"The revised scheme is forwarded to the government. It will be more customer-friendly and cover large number of applicants," said K Unnikrishnan, deputy chief executive, Indian Banks Association, which recommended the modifications to student loans after reviewing the current model.
At present, banks do not seek collateral on education loans up to 4 lakh, loans above 4 lakh require joint application and collateral.
IBA has proposed that banks will now consider more than one member of the family for loans below 4 lakh. Currently, as a safeguard measure against defaults, most banks don't give loans to more than one member of a family.
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