Government owned banks, suffering from rising level of stress loans would be see a marginally reduction in bad loans as some of bad loans in education portfolio would be upgraded as performing accounts with centre promising to pay interest component on loans taken prior to 2009 by a section of borrowers. Stress in education loan portfolio had risen post 2008 as several students found it difficult to find placements on accounts downsizing taking place due to global meltdown. A section of the borrowers therefore, failed to pay their dues to banks.
In the interim budget, finance minister, P Chidambaram said that the government pay for interest component on loans students had availed loans prior to end of March 2009 and if it is outstanding as on December 2013. Chidambaram said that the centre would allocate Rs 2600 crore and about 9 lakh students would benefit with this move.
Unlike now, students from economically weak section, who borrowed prior to 2009 were not provided interest subsidy scheme.
"Those from economically weak section who borrowed prior to end March 2009 and have loan outstanding as on end March, 2013, will benefit from the interim budget announcement as their interest burden for this period will be borne by the government, " said M V Tanksale, CEO of Indian Banks' Association.
