Planning for a degree from abroad? Think again! You may find it difficult to collect funds for supporting your education.

Banks are likely to follow stringent education loan norms especially for international universities. In fact they are also planning to lower the limit for collateral requirement for destinations like the US & UK.

According to market sources HDFC Bank has already decided to be conservative in it's lending to students focused on the aviation sector. A bank official said, "There are always some sectors which are riskier than others. In the last few months, aviation has been identified to be one such sector, and hence we were cautious while disbursing educational loans in this sector."

Another senior banker feels that this is a fair move at a time when the banking industry is facing a downslide in the equity markets. "It's always better to prepare a disaster plan rather than wait for the disaster to strike, and then plan. Not only will the banks benefit, but students will also be saved from an uncertain future," the banker said.

Senior Vice-President of retail assets, Axis Bank, Sujan Sinha agrees with this view and says "Though it's a bit premature to comment, but considering the uncertainty surrounding the Western economies, the possibility of banks getting stringent about education loans can't be ruled out."

Students generally head towards the foreign countries to pursue their master's degree but mostly turn up pursuing courses offered for 12-18 month duration, unlike India. Further the job markets are also unlikely to stabilize in the near future that might pose a problem for students availing education loan.

Anindya Sen, professor at the IIM, Kolkata, said: "Those students going to lesser known universities will find it difficult to fund their education, as the banks are likely to be extra careful while sanctioning education loans."

Another outcome will be a major shift from the financial sector to other areas of study. "Looking at the job market, we will also see a sectoral shift over the next couple of years. Not many students will go abroad for degrees in financial studies. There will also be a slight dip in the salary packages," he said.

Rupee depreciation in the recent past has also affected the banks decision. Six months earlier, a loan of $25,000 was around Rs 10 lakh but now the same loan costs Rs 12.5 lakh following the rupee depreciation.

Rising defaults in the country has also forced banks to take such a step. A Syndicate Bank official says, "If we are faced with such a problem, we have leverage and we may package the loan differently and offer the opportunity of postponing certain payments or making balloon payments in later part of the loan. But they will have to repay the loan within the specified time period. It will also depend on how genuine the case is."

Education loan that is a student's friend to pursue his dream may not prove faithful due to banks' resorting to follow tighter norms.