Despite a slowdown in the economy, public sector banks have registered a 30-40 percent year-on-year growth in education loans.

Bankers say that the demand in education loans will only pick up if the centre comes out with a subsidy scheme for economically weaker sections of the society. In fact, the centre and state governments have been doing a lot so that these sections have an easier access to education loans.

Recently there has been a revision in eligibility criteria for education loans in Virudhnagar, MP. According to the revised norms, the students who could not clear the plus two exams in their first attempts can also avail education loans.

Bankers also say that if the proposal to set aside a guarantee fund for protection against possible defaults materialises, it would further boost the education loan segment as bankers would be willing to grant greater education loans.

Seeing a huge potential in the sector, HDFC bank has announced a 41% stake in Credila. Credila specialises in overseas student loans.

Country's largest lender, State Bank of India has seen a 42 percent year-on-year increase in education loans. The average ticket size of the loan has increased to Rs 4.5 lakh in Sept 2009 as against Rs. 2.5 lakh in September 2008.

Banks provide loans up to 10 lakh for studies in India and up to Rs. 20 Lakh for education abroad. However, 70 percent of the loans lie in the up to 4 lakh category.

Union Bank of India and Corporation Bank bank's education loan portfolios grew by 40 percent and 33 percent respectively.