STOCK MARKET BSE NSE

Rajan Frowns on 'Subsidising' Foreign Education Loans

The RBI Governor said banks are actually subsidising student education loans for overseas studies under the priority sector lending segment.

Published: 21st September 2014 03:02 PM  |   Last Updated: 21st September 2014 03:02 PM   |  A+A-

RaghuramRajan_PTI
By PTI

MUMBAI: Calling for a re-think on easy credit, RBI Governor Raghuram Rajan has said banks are actually subsidising student education loans for overseas studies under the priority sector lending (PSL) segment.

"We actually subsidise, in the priority sector, student loans to study abroad. Are students studying abroad the most needy in the country or is it the most important?" Rajan said in an address to bankers at an industry summit here last week.

"This is something people have got used to. I am not saying it is bad, but it is something you should ask questions about. We have to keep asking ourselves, why should some sectors get more easy credit than others," he said.

Under priority sector lending norms, banks are mandated to lend up to 40 per cent of their overall credit to marginalised sectors like agriculture, housing, small businesses and education.

Banks lend to such identified sectors as per their base rates and the shortfalls of the targets have to go to the low-yielding Rural Infrastructure Development Fund (RIDF).

Most banks, especially in the private sector and overseas banks generally fail to meet these targets. Even some state-run banks fail to meet this target due to lower number of branches.

Under the present norm, a loan of under Rs 20 lakh taken by an individual for studying abroad qualifies as priority sector lending.

As on September 15, the outstanding education credit, including for loans to study within the country and abroad, stood at Rs 579.02 billion, according to RBI data.



Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp