Education Loan NPAs Of PSBs Fall Sharply To 2% In FY25: Government

New Delhi, Dec 16 (KNN) Gross non-performing assets (NPAs) on education loans of public sector banks (PSBs) have declined significantly over the past four years, reflecting improved asset quality, the government informed Parliament.

Minister of State for Finance Pankaj Chaudhary, in a written reply, said that as per Reserve Bank of India (RBI) data, gross NPAs on outstanding education loans of PSBs fell from 7 per cent in FY 2020-21 to 2 per cent in FY 2024-25.

Credit Decisions Governed by Bank Policies

On credit-related matters, the minister said, lending decisions of regulated entities are deregulated and governed by board-approved loan policies, framed within regulatory and statutory guidelines and loan agreement terms.

RBI has advised banks to put in place a Board approved loan policy and to take credit decisions strictly in line with such policies and regulatory principles.

RBI Measures to Resolve Stressed Assets

To improve recovery and address stress in the banks, RBI has issued the Prudential Framework for Resolution of Stressed Assets under the RBI (Commercial Banks-Resolution of Stressed Assets) Directions, 2025. The framework focuses on early recognition and time-bound resolution of defaults.

Collateral-Free Education Loans

The RBI has advised all scheduled commercial banks to adopt the Model Education Loan Scheme (MELS). 

Under the scheme, need-based education loans up to Rs 7.50 lakh do not require collateral security or third-party guarantee if eligible under the Central Sector Interest Subsidy Scheme or the Credit Guarantee Fund Scheme for Education Loans. 

Public Sector Banks may also extend collateral-free loans beyond this limit on a case-to-case basis as per their internal policies. Additionally, banks have been advised not to mandatorily seek collateral for education loans up to Rs 4 lakh.

PM Vidyalaxmi Scheme for Meritorious Students

The government has also launched the PM Vidyalaxmi scheme in November 2024 to ensure that financial constraints do not hinder access to higher education. 

The scheme facilitates collateral-free and guarantor-free education loans for meritorious students admitted to top Quality higher educational institutions (QHEIs) through a transparent and student-friendly process.

(KNN Bureau)