Painting a stark picture of the country’s poor state of employment generation, the Reserve Bank of India (RBI) has revealed that Indian banks have seen a 142 per cent rise in student loan default during the past few years, reported The Indian Express.
The rise in bad loans in the education loan segment has been reported at a time when IT companies are laying off their employees and there is a slowdown in hiring. It also coincides with the Indian industry battling overcapacity, demand slowdown, stalling of new projects and defaults by top corporates.
In May this year, executive search firm Head Hunters India had warned that the job cuts in IT sector will be between 1.75 lakh and 2 lakh annually for next three years due to under-preparedness in adapting to newer technologies.
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A Right to Information (RTI) response from the RBI has also revealed that state-owned banks account for over 90 per cent of educational loans and they are the worst hit by the loan default. Private banks have largely stayed away from giving student loans, according to the data.
More than half of education loans were taken by applicants in southern states, which have also reported most defaults. Students from Tamil Nadu and Kerala are in the forefront of taking loans, according to an official of a nationalised bank, the report adds.
Experts have also attributed the rise in defaults to the setting up of educational institutions without considering their employment potential.
