Indian Banks' Association (IBA) has advised banks to make some modifications in the process of approval of education loan applications, which will make it easier and less time consuming for students to avail education loans.
IBA has directed banks to approve all eligible education loan applications in 15 days. Apart from this, the association has also asked banks to communicate the reasons for refusal of education loans in writing to the applicants. At present, there is no time limit within which banks have to sanction education loans. As a result, at times, applicants have to wait for months to get a reply from banks regarding their education loan status. Moreover, currently banks also refuse these loans on "flimsy grounds".
The new suggestions from the banking body have come as a means to curb these practices followed by banks, which lead to inconveniences for the loan applicants. According to officials, education loans segment has seen low approval rate and erratic implementation process.
It is to be noted that earlier, Finance Minister P. Chidambaram had directed the banks to make education loans affordable and less complex to accelerate growth in this segment of retail loans. He had also asked banks to atleast consider all applications and to disburse education loans in all states. Banks reacted to this by hinting that they might sanction education loans at lower rates and by eliminating collateral clause.