Student Loans in India
July 11th, 2007
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The government in India is moving towards guaranteeing student loans,
In a significant step towards making it easier for banks to give loans to needy students, the Government may soon stand as the guarantor for them. This will help ensure that needy students are not refused an education loan for want of a security or collateral…This (the loan-guarantee) mechanism will cover 75 per cent of the total amount, in case of a default by students taking bank loans,” a source told the Express
This is a good step which allow poor students to obtain loans from financial institutions. However, for the scheme to work the government has to put in place rigorous credit worthiness regulations. Unlike in America, the credit check system hasn’t taken off in India resulting in large number of defaults. Government will also have to work closely with banks to ensure that banks write off loans only after making strenuous efforts at recovering them. With the government as guaranteer, these will be a huge incentive simply not to bother.
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