RBI against recast of study loans

Ballooning bad assets from education loans are forcing banks 
to restructure these loans. And, they want the Reserve Bank of 
India (RBI) to allow them to classify the restructured loan as a
standard asset and not a non-performing one (NPA).
The proposal however, has not found favour with RBI.

Any restructured loan has to be reckoned non-performing, according to 
the RBI rule. In 2008-09, during the global financial crisis, RBI allowed 
banks a one-time dispensation in which restructured loans could be 
considered standard assets.The move was aimed at providing support 
to genuine borrowers facing a cash flow problem because of the global 
downturn.

Given the unsecured nature of most study loans, RBI is not comfortable 
with the idea of a special dispensation here, bankers said.

According to estimates from bankers to the Union finance ministry, NPAs 
had risen above two per cent of the educational loan portfolio, which is about 
Rs 40,000 crore, as on March 31. Banks fear this would rise. These loans 
were an insignificant figure before 2004-05, when a set of more liberal rules 
gave these 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 a year after. The repayment 
period is five to seven years.

In addition, for loans up to Rs 4 lakh, banks cannot ask for any collateral. This 
particular clause is thought by bankers to have made loans more prone to turn 
sour.

Banks may extend the repayment period. "If a candidate takes a Rs 5 lakh 
loan, for example, it may not be possible to repay in five years. Hence, there 
is a thinking to increase the repayment tenure," said a bank official with a 
public sector bank. The repayment period may get extended to 10-15 years, 
as compared to five to seven years now.

In the segment, State Bank of India (SBI) is the largest, with around 25 per 
cent of the study loan market. It had Rs 8,900 crore of such loans on March 
31, growth of 35 per cent over the previous year.

Banks had earlier requested the government to create a credit guarantee 
fund for educational loans, on the lines of the Credit Guarantee Fund Trust 
for Micro and Small Enterprises (CGTMSE), jointly set up by the government 
and Small Industries Development Bank of India (Sidbi). CGTMSE, in which 
80 per cent was contributed 
by the government and the rest by Sidbi, provides credit guarantees to banks 
and other financial institutions for facilitating collateral-free lending to medium 
and small enterprises.

Chhattisgarh to open schools in Maoist strongholds

Raipur: Chhattisgarh will open three residential schools for boys in areas worst hit by Maoist violence, a statement said Sunday.

"The government will construct three ashram (residential) schools for boys with 50-seat capacity each in Dantewada district with Rs.94.42 lakh (over $208,000) on expenditure," the statement said.

The ashram schools will come up at village Kasoli, Badepanera and Barsoor in the worst Maoist insurgency hit district of Dantewada. The public works department will construct the school buildings.

School education has been severely hit in tribal-dominated Dantewada. The state government allowed paramilitary troopers to station themselves in school buildings for carrying out anti-Maoist offensives and in turn rebels have bombed dozens of these buildings in forested pockets since 2005.

Obama-Singh knowledge initiative: IITs begin work

Mumbai: The Indian Institutes of Technology (IITs) and central universities will shortly begin work on sending an association of post doctoral students and faculty members to the US universities for training from the next academic session.

The training which is part of the Obama-Singh 21st Century Knowledge Initiative, will have around 100 faculty members to be trained initially. The numbers would be scaled up to 1000 later.

"Ministry of Human Resource Development will spend around Rs 130 crore on the entire initiative. We would be spending around Rs 13 lakh on each faculty member. The universities where training would take place, however, would be decided by each individual university and IITs," said a senior MHRD official University of Delhi (DU) Vice Chancellor, Dinesh Singh, told Business Standard that DU would certainly take advantage of this initiative and begin work as per MHRD's direction.

DU is already running faculty training programmes with four universities in the UK, namely -- University of Nottingham, University of Birmingham, University of Edinburgh and King's College London. University of British Columbia, Canada, is also receiving faculty from DU.

"We have already sent 16 faculty members for training this year. We are targeting a number of around 25 faculty members to be sent next year. These faculty members will be trained in Bio-technology, Mathematics and Computers, Economics and Commerce. We have an arrangement with the University Grants Commission where we get Rs 15 crore for training these faculty members," said a senior faculty member from DU.

As per data from MHRD till May 2010, Delhi University has around 51 per cent vacancy, out of the 1,500 sanctioned posts. The total vacancy is of around 763 posts out of which 729 have already been advertised and interviews are being scheduled.

IIT Kanpur is also drawing plans to firm up this initiative. "IIT Kanpur has tieups with large number of universities. We would be focusing on specific areas which we would soon decide. As part of the training programme, there is one component related to faculty development where young faculty members would be trained in research. Another component is academic leadership development where vice chancellors, directors and registrars would be sent for leadership development training," said Sanjay Dhande, Director, IIT Kanpur.

At the IITs, number of vacancy has increased from 877 in 2008-09 to 1,065 in 2009-10. The vacancy in these institutions in 2007-08 was 971. There are 280 vacant posts in the eight new IITs.

On his visit to India last month, US President Barack Obama at a joint press conference with Prime Minister Manmohan Singh had launched the Obama-Singh 21st Century Knowledge Initiative with funding from both sides to increase university linkages and junior faculty development exchanges between the US and Indian universities, including greater emphasis on community colleges.

"Building on our successful efforts to expand educational exchanges, including our Singh Obama Knowledge Initiative, we'll convene a summit to forge new collaborations in higher education. And we are announcing two initiatives to deliver progress to our people," Obama had said.

The initiative assumes significance as top 22 universities in India have 34 per cent vacancy in teaching jobs, with 11,085 sanctioned posts and 3,777 vacant posts.

According to the MHRD the situation is so bad that the new central universities have appointed guest faculty on contract to meet their immediate requirement.

Sikkim University is the worst hit with a staggering 84 per cent vacancy (169 vacancies out of the total posts of 201).

MHRD says all the posts have been advertised and many have been filled on contractual basis.

While Maulana Azad National Urdu University has 118 vacancies out of 248 posts; Aligarh Muslim University, has a vacancy of 235 posts against the sanctioned strength of 1,387.