With the Union Budget all set to hit soon, lenders mainly the public sector ones are hoping earnestly that the government will come up with a special fund for guaranteeing education loans upto Rs 7.5 lakh.

Rising number of non performing assets (NPAs) from the education loan segment has been increasingly becoming a source of worry for banks. The level of NPAs has almost doubled in the year 2010-11 to Rs 1600 crore as against Rs 750 crore in the year prior to that.

Banks have urged the government that the fund namely Credit Guarantee Scheme for Education Loans (CGSEL) should have an initial size of Rs 2500 crore.

Speaking about the necessity of the fund, an official said, "Though repayments pick up once a young graduate gets a good job, the fact that the account has become non-performing proves a disincentive for further lending to the education loan segment. Hence, the need for the guarantee fund."