The proportion of non performing assets (NPAs) in education loans is seeing a toll thereby causing deep concern for banks. Banks have sought help from the government in the form of a credit guarantee fund as protection. They have requested for a fund of atleast Rs 2500 crore.

Bank estimates presented to the finance ministry read that there has been a 2% rise in NPA level of education loan segment as on March 31. The figure was earlier almost negligible as in 2004-05.

The education loan scheme allows the borrower to borrow as much as Rs 10 lakh for education in India and Rs 20 lakh for education abroad. The scheme allows borrowers relaxation of repayment for the entire study period plus one year after that which is considered as the moratorium period.

Also, loans upto Rs 4 lakh come without any collateral.

It has been observed that the share of bad loans is the highest for the largest lender of the country, State Bank of India.

Banks have requested the government to create a credit guarantee fund for educational loans, on the lines of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) jointly set up by the government and Small Industries Development Bank of India (Sidbi).