In yet another blow to the banking sector and economy, 9.55 percent of the education loans extended by public sector banks have been categorised as non-performing assets (NPAs) as of December 31, 2020.
Of the total outstanding loans, over 3.7 lakh accounts worth over Rs 8,000 crore have turned bad, the Central government told the Parliament on Monday.
Industry experts opine that multiple factors, including job losses and the rising drop-out rates following the spread of the contagion, were key contributors to the rising NPAs in the said category.
The current 9.55 percent NPA of the education loans is the highest in the last three years, reported Mint. According to the finance ministry data, in FY20, the NPAs in this category stood at 7.61 percent, falling from 8.29 percent in FY19 and 8.11 percent in the year preceding that.
The NPAs in the education sector surpasses that of the housing, vehicle and retail loans sector by a huge margin.
Among the courses for which the NPAs in the education sector stood the highest was engineering with over 1.76 lakh accounts to the tune of Rs 4,041.78 crore turning bad.
Besides the crisis in the job market and economy, repayment of such loans, particularly during an economic downturn, is not the priority of people, Narayanan Ramaswamy, head of a consulting and auditing firm KPMG, told Mint.
“A banker cannot take away an asset in the case of an education loan because in most cases there is no mortgage, unlike, say, a housing loan,” Ramaswamy said.
KR Shyam Sundar, a labour economist and academician, told Mint that in a situation of income loss and job loss, education repayments have taken a back seat against survival.
“Besides, students have gone for a deferment of their education and many must have dropped out from courses such as engineering, contributing to the surge in non-performing assets,” Sundar was further quoted as saying.
Among the states with the highest NPAs in the education sector is Tamil Nadu, accounting for Rs 3,490.75 crore turning bad by December 31, the Centre said. The figures also showed that nearly 1/5th of the total education loans in Tamil Nadu and over 1/4th in Bihar had turned bad.
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