A new trend has been set up by banks in the loan segment. They have started offering loans to students for taking coaching classes for entrance examinations.

With entrance examinations for medicine, engineering and other professional courses getting more and more competitive, it is becoming imperative for students to join coaching classes. High fee amounts of these coaching institutes has given banks the idea to offer loans in this regard too.

Public sector lender, Central Bank of India has introduced a scheme called ‘Cent Comp-exam.' As per this scheme, a maximum amount of Rs 2 lakh can be availed by a student as loan with a repayment period of 36 months. The interest for the same will be 12%. For girl students, the interest rate is 11.5 per cent.

This loan is an unsecured personal loan, though the bank looks at it more as a service than a product, said a senior bank official.

Talking about the scope and need for such a product the official said, "Entrance examinations have become competitive. And coaching classes charge high fees. We expect there would be demand for the scheme across the country. In places like Kota, in Rajasthan there are dedicated institutions which specialise in training students for entrance examinations," he said.

At the all India level, 15 to 18 lakh students appear for entrance examinations every year. Along with these also come the state level examinations. The fees asked by coaching institutes can be as high as Rs 5 lakh, said the official.