Although the economic slowdown has had a significant impact over the loan portfolio of banks, yet the education loan segment seems to escape the fall.

Senior bank officials in the industry say that they do not expect any recession and mounting non-performing assets (NPA) in their education loan portfolio. Despite the job market been bleak, banks have registered have a growth of around 35% to 40% in their education loans.

Normally banks extend education loans considering the course to be pursued by the applicant and job prospects in the market. In the past three months, nearly 5 lakh people have lost their jobs but interestingly the education loan portfolios do not look affected by it.

Executive Director of United Bank of India, Mr T.M. Bhasin said, "We do not expect any defaults surfacing in this segment. People who have lost their jobs are primarily unskilled labourers in the export and gem and jewellery sectors. Banks extend educational loan only for professional courses."

A senior official at Bank of Baroda said that the job market in engineering, management, aviation and pilot training is at a better position and there is no anticipation of loans turning bad. However the bank is taking cautious move while extending the education loans. It is now scrutinizing the course and job market more closely in order to avoid any loan from turning bad.

Even though the banks are taking cautious move, they are expecting their education loan portfolio to rise by a substantial amount. Bank of India anticipate its education loans to grow at the rate of 40% at Rs 1,400 crore as on March 31st, 2009 against the 38% at Rs 1,000 crore recorded on March 31st, 2008.

Similarly the United Bank of India has also registered 40% growth in a year-on-year basis. The education loan disbursal of the bank for the three quarters ended on December 31st, 2008 stood at Rs 322 crore as compared to Rs 225 crore for the entire fiscal ending on March 31st, 2008.

Even Indian Overseas Bank and Indian Bank have registered a growth of 36% at Rs 962 crore and 32% at Rs 1,514 crore respectively for the first nine of the fiscal.