New Delhi, Dec 15 (IANS) The Gross Non-Performing Assets (NPA) of public sector banks, in terms of outstanding education loans, declined from 7 per cent in FY 2020-21 to 2 per cent in FY 2024-25, the Parliament was informed on Monday.

In a written reply to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary cited data compiled by the Reserve Bank of India (RBI) to show that there has been a significant improvement in asset quality of education loans over the years in the country.

The minister pointed out that credit-related matters of regulated entities (REs) such as banks and NBFCs are largely deregulated and are governed by the board-approved loan policies of the REs framed under the ambit of relevant regulatory and statutory requirements and terms and conditions of the loan agreement between the borrower and the RE. The RBI has advised the banks to put in place a board-approved loan policy, and they shall take credit-related decisions in accordance with the stipulated policy, subject to the guiding principles of regulations.

Further, the RBI has taken several initiatives to improve recovery and to resolve stress in banks, including issuance of the Prudential Framework for Resolution of Stressed Assets under RBI (Commercial Banks – Resolution of Stressed Assets) Directions, 202,5 which is a principle-based framework and provides for early recognition and resolution of default in a time-bound manner, the minister said.

All Scheduled Commercial Banks (SCBs) have been advised by the RBI to adopt the Model Education Loan Scheme (MELS), as last amended on March 21, 2024. The scheme provides for need-based education loans, and no collateral security or third-party guarantee is required for loans up to Rs 7.50 lakh, provided they are eligible for the Central Sector Interest Subsidy Scheme or the Credit Guarantee Fund Scheme for Education Loan, the minister said.

The minister further stated that public sector banks also provide collateral-free loans beyond Rs 7.50 lakh, on a case-by-case basis, in accordance with the policies approved by their board.

Further, the RBI directive on Collateral Free Loans – Educational Loan Scheme, has advised that banks must not, mandatorily, obtain collateral security in the case of educational loans up to Rs 4 lakh.

Moreover, the PM Vidyalaxmi scheme was launched on November 6, 2024, which enables loans through banks to meritorious students so that financial constraints do not prevent any youth of India from pursuing quality higher education. The scheme facilitates and enables education loans to meritorious students who get admission in the top Quality Higher Educational Institutions in the country and enables meritorious students of these institutions to take collateral-free, guarantor-free education loans through a simple, transparent, student-friendly application process, the minister added.

–IANS

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