Hyderabad: The repayment holiday that banks give students who take education loans, allowing them to pay after getting the job, is not being seen as a good practice, claim some bankers.
This is seen as one of the reasons for the loans turning into non-performing assets as parents tend to stop paying monthly interest after the course has ended that was supposed to paid till the EMI begins.
Mr Rama Rao, adviser to students in a deemed private university, said. “There is a lot of miscommunication that happens when a student takes an education loan. Parents and students are desperate and the lenders cashing in on them. This is leading to the students borrowing huge sums, and repayment becomes a challenge.”
Most loans end up in litigation and settlement, said Mr Deepak Phani, a professional working with an IT company, said. “I had borrowed Rs 25 lakhs and was given an extension period of one year as we had a major financial crisis. The bank then said I had to repay Rs 42 lakh with interest. I am now fighting the case in court and the bank is approaching my company to name and shame me. Is that fair?”
However, since a loan default is not a criminal offence, the banks are criticised for the steps taken to secure repayment. For the bank, the number of defaulters is an increasing burden but their marketing strategies to lure customers are also under severe criticism.
