Chennai: If you have taken an education loan from the
State Bank of India, the country’s largest public sector bank, you can expect persistent calls from private firms, asking to repay.
Data tabled in the Parliament shows that 50% of all SBI’s Non-Performing Assets (NPAs) or bad
education loans, have been sold to Asset Reconstruction Companies (ARC) as on December 31, 2017. Of the Rs 1,565.1 crore of bad education loans, Rs 915.28 crore has been sold to the ARC.
An education loan becomes an
NPA when there is a default in payment for three months or more. Banks sell NPA education loans to ARCs, transferring its ownership and the responsibility of collecting the loan due, to the private company. It is sold for anywhere between 40%-50% of the loan amount.
SBI and its associates have given the maximum number of education loans-- around 30%, to students across the country. Students in Tamil Nadu and Kerala have been given the maximum number of loans by
public sector banks including SBI, data shows.
SBI is one of only three banks which has sold its bad education loans to private ARCs. The others are Bank of India and Indian Bank, but they have sold only 25%-30% of their
bad loans.
The total education loan NPA of public sector banks is 3.66 lakh loans worth Rs 6,364 crore. Of this, 63,116 loans worth Rs 1,030.43 crore have been given to ARCs by the three banks.
Ministry of Finance has stated that non-coercive methods are not used, or supposed to be used, to get the students to pay back the loan. In 2016, a student in Madurai had committed suicide allegedly because an ARC harassed him to repay the loan.
After this incident, ARCs have lost steam in the loan recovery process, said M Rajkumar, chief organiser of Education Loan Awareness Movement (ELAM), who helps students facing education loan issues. “Three months ago, when an ARC contacted a student in Chennai, we pointed out that interest subsidy was not given fully by SBI. The bank settled for a lower pay-out after agreeing with our point and we were able to avoid the ARC,” he said.
