NBFCs await loan breather for students from Ukraine

Banks may ease loan repayment pressures on students who had borrowed to study in Ukraine through loan restructuring and EMI holidays, education-focused non-bank lenders said.

“Banks are discussing options like restructuring of loans, EMI holidays and tenure extensions. They may also reduce their loan to value from 65%-70% to 50%,” said Jainesh Sinha, co-founder and chief operating officer of GyanDhan, a digital education financing platform and a non-banking financial company (NBFC) which has partnerships with State Bank of India, Bank of Baroda, Axis Bank and ICICI Bank.

The discussions follow the Ukraine crisis which saw thousands of students returning home to uncertainty. While lenders do not have sizeable exposure to students in Ukraine and other nations in the Commonwealth of Independent States (CIS) region, they are open to relief measures on a case-to-case basis, an official at a large public sector bank said on condition of anonymity.

According to the standardized format of Indian Banks’ Association (IBA) , education loans up to ₹4 lakh do not require collateral, but education loans up to ₹7.5 lakh can be obtained with collateral in the form of a suitable third-party guarantee. However, education loans above ₹7.5 lakh require tangible collateral, and, in all cases, co-obligation of parents is necessary. If a student is not able to complete the course within the scheduled time, banks are allowed to extend the time to complete the course by up to two years. If the student is not able to complete the course for reasons beyond their control, banks may consider extensions.

“In the Indian lending sector, especially in higher education and study-abroad, there are a few IBA guidelines for the requirement of moratorium, collaterals, etc, under which the loans are granted to the borrower,” said Varun Chopra, co-founder and chief executive officer of Eduvanz, a fintech NBFC. “Banks are working with regulators so that the financial sector can extend maximum possible support like an extension of the moratorium period and refinancing to help students come out of this difficult time,” Chopra added.

Mint on 7 March reported about the troubles of students returning from Ukraine regarding their education loans, due to the uncertainty over completion of their courses.

Banks in India have outstanding education loans of ₹63,057 crore as of January, down 2.4% from the previous year, according to Reserve Bank of India data. Loans to pursue medical degrees accounted for 11% of the aggregate education loans as on 31 December 2020, showed data presented in the Lok Sabha. The high number of bad loans in the sector has forced banks to turn circumspect in the recent years on educations loans. As on 31 December 2020, 9.5% of all education loans were classified as non-performing, the data showed.

An executive at another education NBFC said on condition of anonymity that the precautions will apply to students who head for higher studies in certain countries. “Banks are re-evaluating geopolitical stability of certain regions. CIS countries will be high on that list,” the executive added.

In the case of Ukraine, students went mainly for an MBBS degree, which at ₹15-20 lakh, is much cheaper compared to ₹80 lakh-1 crore in a private college in India.