Friday, September 1, 2017

Edu loan defaults may hurt students’ credit score: CIBIL



Edu loan defaults may hurt students’ credit score: CIBIL

Pointing to high incidence of defaults in the low-ticket education loans, credit Information Company CIBIL on Thursday said such default history might adversely affect students’ credit score and their ability to take out other loans in the future.

The overall incidence of delinquency on education loans is around 5 per cent, going by dues of 90 days plus. The default rate for education loans with ticket sizes below ~4 lakh is significantly higher (at 8.1 per cent) compared with large-ticket size loans, CIBIL said in a statement. Comparative default rates for other categories are: ~4-5 lakh — 4.8 per cent; ~5-15 lakh — 2.1 per cent. For loan amounts above ~15 lakh, the long-term default rate is under 1 per cent.

The aggregate credit exposure of education loans in the Indian banking system is around ~77,000 crore. This is barely 1 per cent of total banking system exposure, and by itself may not present a systemic risk, CIBIL said.

However, the importance of such defaults can be seen in two aspects. First, these delinquency trends predict the risk profile of future borrowers who will join the mainstream credit market. Second, they may also be reflective of the potential job opportunities in the industry.

Source | Business Standard | 1 September 2017

Regards

Pralhad Jadhav  

Senior Manager @ Knowledge Repository  
Khaitan & Co 

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