One sector which is definitely making banks happy despite the various rate hikes by RBI is the education loan sector. 2007-08 saw a growth of about 30-40 per cent in the education loan portfolio of banks, and if insiders are to be believed then this growth is going to increase even further. According to senior bank officials, the education loan portfolio of banks is set to witness a growth of about 40 per cent in 2008-09.

Bankers feel that the ever-increasing demand among the younger generation and the lower number of non-performing assets are responsible for this healthy growth in the portfolio.

To satisfy the demands, banks have adopted various schemes which have facilitated the growth of education loans portfolio. Several banks are in partnerships with many institutes and are offering special interest rate discounts. In addition to this, they also accord online sanctions and ensure speedy disbursal of the loan.

The country’s largest lender, State Bank of India, is also a major player in the education loan field. Last year, the bank had recorded a growth of 35 per cent in educational loans and grew by Rs 1,000 crore. Speaking about the bank’s expectations this year, Mr P. Nandakumaran, Chief General Manager, Personal Banking, SBI, said. “We plan to sustain the growth at 35 per cent this year,” he said.

The NPAs associated with this portfolio are almost negligible usually in the range of 0.50-0.80 percent.

Mr. V K Dhingra, Executive Director, UCO Bank, also said that the repayment of the loan was not a problem. He said that the competence of the younger generation in bagging a good job with a decent salary after the completion of their education ensures timely repayment of the loan. “The job market is also highly buoyant, so repayment is not a problem,” he said.