Public sector banks (PSBs) may have loosened the purse strings for education loans, but they sure are not going to let students default so easily. The government is considering a host of measures — including a bar code or even a radio frequency identification (RFI) on passports — put forward by banks so that students availing such loans can be tracked.

PSBs suggested these measures to mitigate the risks involved in extending loans to students at a high-level meeting with Finance Minister P Chidambaram.

The move by banks comes in the wake of their exposure to this segment increasing substantially.

As of June 30, 2005, the PSBs’ total outstanding exposure under the education loan scheme stood at a whopping Rs.7,100.25 crore.

In the first quarter of this year alone, 42,797 fresh student loans amounting to Rs 733.68 crore were sanctioned by 27 PSBs. Banks presently give loans up to Rs 15 lakh to students for taking up studies abroad. This could be hiked to Rs 25 lakh in deserving cases. Under the present security norms for student loans, no security or third party guarantee is needed for loans up to Rs.4 lakh.

For loans between Rs.4 lakh to Rs.7.5 lakh, banks ask for a collateral in the form of satisfactory third party guarantee.

For loans beyond Rs 7.5 lakh, banks ask for collateral security of suitable value or a suitable third-party guarantee along with assignment of future income of the student for payment of installments.

(Source: Financial Express)