Banks alarmed at rising defaults in study loans

With a rising proportion of non-performing assets (NPAs) in educational loans ,banks have approached the government seeking protection in the form of a credit guarantee fund of at least Rs 2500 crore.According to estimates given by bankers to the Union Finance Ministry,NPAs had risen above 2%of the educational loan portfolio as on March 31 from an insignificant figure before 2004-05 when a set of more liberal rules gave such loans a boost.In the educational loan scheme ,it is possible to borrow up to Rs 10 lakh for domestic education and Rs 20 lakh for studying in foreign colleges.Borrowers need not pay during the tenure of the course plus one year after.The repayment period is 5-7 years.In addition ,for loans upto Rs 4 lakh, banks cannot ask for any collateral security which is thought by bankers to have made loans more prone to turn sour.(BS 23082010)