Executive Summary Education is central to the Human Resources Development and empowerment in any country. National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives. While government endeavours to provide primary education to all on a universal basis, higher education is progressively moving into the domain of private sector. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area.
Education Loan industry is growing with 53. 51% CAGR and Commercial banks are gearing up to meet this need and has already developed several products to cater the need of Indian Citizens still lots of things to be done. With the implementation of Govt Policies and advent of private Banks and NBFC this segment has seen several changes over the period of time. Still SBI the financial mammoth of the Country is in Numero Uno position when it comes to funding this Sector. No Other Banks whether private or public or any NBFC is near to it in quantum and number of finance.
As Per RBI Website Other significant Player in Education loan Market are Punjab National Bank, Bank of India and Bank of Baroda etc. Overview of Education Industry India has a fairly large and diversified education system. Its billion-plus population consists of a higher proportion of children and young individuals, especially in the age group of 6-24 years, which is the most prospective age group in terms of academic inclinations. This age group accounts for more than one-third of the India’s population.
According to the National Knowledge Commission, for the first time in this decade, the total number of illiterates decreased from 329 million to 304 million. The literacy rate also increased from 18. 3% in 1951 to 67. 3% in 2004, as per HRD statistics. The National Literacy Mission aims at achieving 85% literacy at the end of the Eleventh 5-year plan (2007-2012). In order to achieve higher literacy rates, the government has been initiating programmes such as the Sarva Shiksha Abhiyan, which aims at achieving universal elementary education of satisfactory quality by 2010.
Furthermore, the development of an Educational Development Index (EDI) for elementary education is perceived as a significant step towards imparting quality education. The country’s present education system comprises elementary (primary: class I – V and upper primary: classes VI – VIII), secondary (high school: class IX – XII) and higher / tertiary education (post-class XII), which consists of undergraduate, post graduate and professional degree and diploma courses. Steady growth in overall student enrolment
Higher education in India has scaled up gradually from 20 universities and 500 colleges at the time of independence to 416 universities and 20,677 colleges (including 2,166 women’s colleges) currently. These comprise of 251 state universities, 24 central universities, 103 deemed universities, 5 institutions established under state legislations and 33 institutes of national importance established by central legislation. At the start of the academic year 2007-08, the total number of students enrolled for higher education stood at 11. million; of which 12. 94% were enrolled in university departments and 87. 06% in affiliated colleges. More than 80% of the students are enrolled in three faculties of arts, science and commerce/management whereas the rest are enrolled in professional courses with the highest percentage in engineering and technology followed by medical sciences. It is interesting to note that in India, where agriculture and allied constituents play a critical role in economic development, student enrolment in agricultural courses accounts for around only 0. %. Enrolment of female students grew phenomenally from less than 10% of total enrolment during independence to around 40% in 2005-06. Likewise, the number of women colleges also increased in the last decade from 1,146 to 1,902 in 2005-06. The faculty of arts accounted for more than 50% of the total female student enrolments. Kerala, Goa and Punjab were the three top states in terms of female student enrolment and their respective female student enrolments in the total enrolments were 61%, 59. 2%, and 51. 7%.
India has the largest number of academic institutions in the world in terms of higher education and is the third in the world in terms of enrolment, after China and the US. However, only 7% in the age group of 18-24 enrol for higher education in India and this is only one-half of Asia’s average. On a brighter note, however, enrolments have been increasing steadily in higher education in the past 2 decades from 3. 4 million in 1984-85 to 11. 03 million in 2005-06. In addition to a medium of livelihood, higher education is also now regarded as an instrument of infrastructure for social and economic change.
Fundamental policy changes at the grassroots level in issues pertaining to curriculum, infrastructure, governance, and funding are taking place to make India’s higher education a socially and economically viable option in a competitive world. Factors such as e-learning, distance education, public private partnerships coupled with international collaborations and exchange programmes are changing the face of higher education in India. The higher education system in India has changed its unidirectional approach and is slowly transitioning into producing professionals with better quality education.
Traditional programmes are adopting innovative measures to encourage enrolment and institutes are promoting research based practices. Efforts are being made to move from the theoretical base to a more ‘real-world’ and career-oriented approach. On the flip side, India’s education system continues to grapple with deficiencies such as a rigid system, lack of funding, inadequate infrastructure, demand supply gaps, urban-rural divide, and scarcity of skilled manpower. Education Funding and National Growth
Favourable demographic and income trends in terms of salaries, savings, and expenditure are expected to act as catalysts in boosting higher education. During 2000-07, household sector savings and per capita income grew at a CAGR of by 13% and 9%, respectively, and the gross national disposable income grew by around 11%. Likewise, consumer spending patterns in pursuing education has also magnified in the last couple of years as people’s willingness to invest in education has increased to a large scale. Education is now perceived as a safe, long-term investment rather than a means to sustain oneself.
The 300-million-strong middle class consumer base considers education as a part of their basic necessities for securing their children’s future. According to the Central Statistical Organisation (CSO) and the Ministry of Statistics and Programme Implementation, the total private final consumption expenditure (at current prices) in the domestic market grew at a CAGR of 9% during 1999-2000 to 2006-07. During the same time, the private final consumption expenditure (at current prices) on education grew at a CAGR of 13%. The share on educational activities as a part of the total private final consumption expenditure rose from 1. % in 1999-2000 to 2. 4% in 2006-07. At a macro level, the direct relation between education spending and economic growth reveals a healthy outlook for India’s education system but at a micro level it reveals disparities in levels of acquiring higher education between urban and rural areas. According to the Central Advisory Board of Education’s (CABE) report on financing of higher and technical education released in 2005, population with higher education is directly proportionate to household economic status in rural as well as urban areas.
In the bottom quintile (monthly per capita consumption expenditure quintile), only 1% of the population has higher education and the ratio steadily climbs to above 10% in the richest quintile. The disparity between rural and urban areas is highlighted when this ratio between the top and bottom quintiles increases by 7% in rural areas and 15% in urban areas. Furthermore, among every 1,000 persons, urban regions have around 11. 0% college graduates or above, whereas rural areas have only 1. 6%. Overview of Education Loan Industry
Education loans are already considered to be a component of the priority sector advances and further growth of this portfolio is expected once Basel II norms are implemented from Mar 2009 for domestic banks. According to the Basel II framework, educational loans would no longer be treated as a part of consumer credit but shall be considered as a component of the regulatory retail portfolio with the risk weight lowered from the current 125% to 75%. Consequently the chances of banks cutting down on the interest rates of these loans seem to increase in the near future.
Hurdles arising due to inability of providing collateral security soon might be a thing of the past if the proposed Higher Education Loan Guarantee Authority (HELGA) scheme for the under privileged students comes through. The scheme intends to facilitate the education loan process by providing collateral security by the Government of India (GOI). At the same time, since more than 70% of the higher education budget is met via state expenditure, this scheme is expected to increase the Centre’s role in higher education areas.
As there is a established relationship between the education and economic and social progress of country and there is direct relationship in education funding and growth in education. Under the Instruction of the Govt Of India and Based on recommendations made by a Study Group, IBA had prepared a Model Educational Loan Scheme in the year 2001 which was advised to banks for implementation by Reserve Bank of India vide circular No. RPCD. PLNFS. BC. NO. 83/06. 12. 05/2000-01 dated April 28, 2001 along with certain modifications suggested by the Government of India.
This Model Loan Scheme forms the basis of education loan product of all the banks and all the banks has implemented the scheme it toto. However a few Banks like SBI, Bank Of Baroda and a few other banks has gone far and have added some more facilities in their Loan Products. A few NBFC like HDFC Credila has also joined the Education Loan industry and growing aggressively in this market. These are NBFC who are only financing Education Loan and as they are not covered by the IBA guidelines they are free to expand the business as per their style. RESEARCH METHODOLOGY
To meet the essentials of the project, the presents study was undertaken at Pune City. The methodology of the study mainly consists of target population, sampling design, tools and methods of data collection, analysis and interpretation of data and the aims and objectives of the study. RESEARCH STATEMENT To find out the preferred education loan provider in Pune city and reason thereof and make a comparative study of features and procedures of education loans of SBI and its main competitor in the city. RESEARCH OBJECTIVE The objectives of the research study are the following: The principal objective of the project / research is to find the preferred education loan provider and why the same has been preferred by students and their parents/guardian * To study the reasons of preferences. * To thoroughly analyses the attitude of the people involved in deciding the preferred education loan provider and their opinion about their preferred education loan provider. * To find out the main competitor of SBI in Pune. * Make a comparative study of product and features between SBI and its main competitor. RESEARCH DESIGN
It is the blue print or the conceptual structure within which the research was conducted. At the outset, the project / research topic was chosen from the given list for the project and then the study is done on the project titled “A survey among students (both before and after) and parents about their preferred educational loan provider, and reasons thereof. A comparative study of features and procedures of education loans of SBI and its main competitor in the city Hence, the type of data that is required for the study and where to look for it is identified.
Here data collection is the main and the foremost methodology of the study. The technique of data collection that will be used is decided then the data that is required for the purpose of the study is collected from both the primary and as well as the secondary sources. The sample size and sampling technique are then decided upon in order to carry out the survey in consultation with the mentor ( S G Kamble) at SBLC Pune . Then the time period or the duration of the study under taken is finalized. SAMPLE SIZE
The sample size representing the number of respondents was 200. SAMPLING TECHNIQUE For the purpose of data collection, the researcher has to rely upon the deliberate or random sampling method data collection, which is very comprehensive for the study. TOOLS FOR DATA COLLECTION Data collection is the main and the foremost methodology of the study. Data has been collected for the purpose of the study from both primary and secondary sources. I. PRIMARY SOURCE: - The primary sources of data were the students and parents applied/availed educational loan.
For the purpose of the collection of a primary data, a questionnaire was designed to assess the preferences of the respondent and factors behind them. II. SECONDARY DATA: - Information and data were also collected from the website of the target Banks. Apart from this disguised visit was also made to target Banks to understand the complete picture. The information so obtained from both the sources are thoroughly analyzed and then tabulated mathematically to arrive at the conclusion. TOOLS FOR DATA ANALYSIS The following tools of data collection have proven to be reliable for the collection of primary data.
The primary tools that were used in the collection of data were observation and questionnaire schedule. Firstly, how many questions were to be asked are specified and it was decided that every respondent would be individually approached. The respondents were assured that the information given by them would be kept confidential and shall be used for academic purposes only. The researcher clarified all the doubts of the respondent and the researcher. After the completion of the survey, the findings were analyzed. Whatever data was collected, was thoroughly checked, verified and corrected.
Wherever it was found necessary or essential, some modifications were done. Priority was given to the attainment of the research objectives. The completion of the responses of the total number of employees surveyed was made and presented in the form of tabulation which is generally based on the computation of various percentages for the responses given in order to reach at the conclusio SCOPE OF THE STUDY The present study has been focused towards studying the education loan products of various education loan provider. The present study was conducted in the Pune itself.
The main motive of study was to find out the best education loan provider or say most preferred education loan provider on the basis of survey conducted among existing and proposed client of SBI and other Banks in education loan segment in Pune. Further a study was also made and a comparison has been mad among the SBI and its main competitors in Pune. Therefore, in every sense, the features and procedures of main competitors of SBI has been comprehensively covered under the present study and has been validated by the survey made among the respondent. LIMITATIONS OF THE STUDY
There are certain limitations of this research which are as follows:- 1. The first and foremost limitation of the study is the paucity of time. The project was supposed to be completed within a scheduled time. The primary limitation of the study is that it was to be completed within the limited time available. As the researcher was involved in his day to day work it was very hard to personally collect all the data from the respondents as it is not possible to investigate and gather all the required information about each and every aspect of the product, features and procedures within a short span of time. . Another limitation of the study was the paucity of monetary resources and it was not possible to personally meet each and every respondent which is a costly and time consuming affair hence telephonic conversation was made with many existing clients of the SBI and students/parents. 3. Due to above said reason limited visit were also made to competitors office and information provide on website of competitors has been relied upon. 4.
In spite of all these difficulties and shortcomings, efforts were made to extract as much information as possible in order to make an analytical study of the assigned subject, maintaining thus whatever validity and reliability was possible to be maintained. Statistical Analysis of Survey Type of Course Type of Course| Percentage| Course Taken in India| 82| Course Taken Abroad| 18| 82% of the respondent has either applied or availed loan for the Study in India while 18% of the Respondent has applied or availed loan for study abroad. Quantum of Loan Applied Quantum Of Loan Applied| Percentage|
Up to 4 Lakh| 54| Above 4 Lakh and upto 7. 5 Lakh| 22| Above 7. 5 Lakh| 24| 54% of the Respondent has either applied or availed loan upto 4 Lac while 22% of the respondent has applied for a loan between 4 to 7. 5 Lac and 24% of the respondent applied for a loan above 7. 5 Lacs. Availability of Tie up Availability of Tie up| Percentage| Tie Up Available| 24| Tie Up Not Available| 76| 24 % of the respondent has replied that their college has a tie up with any education loan provider Impact of Tie Up Impact of Tie Up| Percentage| Decisive Impact| 72| Non Decisive | 28|
In the cases where tie up is available in 72% cases respondent feels that tie up makes a decisive factor while choosing the education loan provider. Preferred First Education Loan Provider Bank| Percentage| SBI| 34| HDFC Credila| 15| BOI| 7| BOB| 6| PNB| 9| BOM| 6| Others| 23| As per survey it has been found that 34% of respondent has chosen SBI as their first choice to take a education loan. Surprisingly HDFC Credila has emerged as the second choice of respondents to take a education loan. Preferred Education Loan Provider as per Top 5 Choice Bank| Percentage|
SBI| 80| HDFC Credila| 34| BOI| 30| BOB| 25| PNB| 20| From Survey it has observed that SBI is still the undisputed leader in Education Loan Market as 80% of the respondent has voted SBI as one of their top 5 choice to take a education loan. Other banks are no where near to SBI in customer’s choice. Primary Reason of Preference Primary Reason of Preference| Percentage| Tie up with college| 15%| Existing relationship with Bank| 14%| Less requirement of Documents and formalities| 17%| Interest rate| 6%| Staff Support| 10%| Clarity of policies and terms and condition| 8%|
Time taken while processing of application| 17%| others| 15%| Above chart represents the factors which a Respondent looks after as their first ad foremost reason of choosing a education loan provider. There is not a single dominating factor. However Time taken for processing, existing relationship and Tie up with the college are the significant factors. Top 5 Reasons of Preferences Top 5 Reasons of Preferences| PERCENTAGE| Existing relationship with Bank| 60%| Time taken while processing of application| 55%| Less requirement of Documents and formalities| 50%|
Staff Support| 40%| Tie up with college| 35%| Clarity of policies and terms and condition| 35%| Interest rate| 30%| From Survey it is evident that Existing relationship with the Bank creates a great recall value in customer’s mind while looking for a education loan as 60% of the respondent has chosen the existing relationship as one of the top 5 factors which effects their decision of choosing the Education loan provider. Time Taken while processing of application and less requirements of documents and formalities are also other two major factors Findings of the Survey
On the Basis of study of Questionnaires and interactions with the Respondents following facts have been observed: 1. SBI is undisputed market leader in Education loan Market and Most Preferred Banker among respondent. 2. Respondent has preferred SBI over other Education Loan provider due to Various reason which includes Existing relationship, Transparency, Trust etc. 3. It has been communicated to the Researcher by the Respondent who has either taken loan from SBI or approached SBI for loan that their experience with SBI could have been improved. . It has also been observed that Respondent who has got the admission in the college where tie up is available; it has made a decisive factor while taking the decision of the preferred education loan provider. 5. Respondent gave higher weightage to their Existing relationship with the Bank, Tie up with the college, Time Taken for processing the loan, Less documentation and formalities, staff support etc instead of Interest rate, coverage of course, processing fees and other factors. . Presence of Private Banks in education loan is negligible Only HDFC Credila which is a NBFC ad only deals in Education loan has shown a aggressive presence in Pune region. 7. The main reasons of Respondent preferring HDFC Credila are availability of preapproved loan and Tie Up with the college with door step services. 8. During this Survey HDFC Credila, Bank of India, Bank of Baroda and Punjab National Bank has emerged as the main competitor of SBI in Pune Region.
A comparative study of features and procedures of education loans of SBI and its competitors As During the Survey HDFC Credila, Bank of India, Bank of Baroda and Punjab National Bank has emerged as the main competitor of SBI in Pune Region, a comparative study of features and procedures of education loans of SBI and these competitors has been A Comparative study is not possible unless there are some qualitative and quantitatative factors are shortlisted on the basis of which a comparative study could be made.
Hence we have shortlisted following factors on the basis of which comparison has been made and comparative rating has been provided. 1. Eligible Courses: 2. Student Eligibility 3. Eligibility Expenses 4. Tenure of Loan 5. Paper Documents required 6. Maximum loan 7. Margin 8. Security 9. Guarantor required 10. Interest 11. Mototarium 12. Processing Fees 13. Prepayment penalty 14. Others | | | HDFC Credila| | Eligibility| * Borrower must be an Indian citizen * Co-borrower must be an Indian citizen * Borrower must be 18 years of age or older * Co-borrower must have a bank account in any bank in India with check writing facilities * Confirmed admission in the colleges before disbursement * Borrower and Co-borrower to meet Credila's underwriting criteria | Co-borrower Requirement| The loan will be co-signed by a co-borrower in India * A co-borrower is mandatory for all the student loans * The co-borrower can be parent, brother, sister, guardian, or any other relative * Co-borrower's role would be, necessarily, like the primary debtor | What Costs Are Covered? | * All of the tuition fees as determined by the college/University * Up to 75% of other expenses including living expenses, books, etc. as determined by the college/University * Up to INR 50,000 for travel to abroad from India, if applicable | | | | Loan Amount| | Minimum Loan Amount * Indian Rupees 1,00,000Lifetime Maximum Loan Amount * Indian Rupees 20,00,000 | Rate Of Interest| * Rate of interest will be floating rate of interest linked to Credila's Benchmark Lending Rate (CBLR) * The floating interest rate will calculated monthly based on the prevailing CBLR at the beginning of the month * The interest will be calculated using Simple Interest Rate * Floating rate of interest to be Credila's CBLR + 1. 00% per annum | Loan Disbursement| The loan amount will be disbursed in Indian Rupees * Credila's servicer will disburse the tuition fee directly to the educational institute * The tuition fee will be disbursed in installment as per the requirement of the specific educational institute * The loan amount related to other expenses will be disbursed in installments spread over the duration of the study | Loan Re-payment Terms| * Loan Interest Re-payment 1. Loan interest re-payment will start immediately after disbursement of the first installment of the loan * Loan Principal Amount Re-payments must commence 2.
After 6 months of completion of studies by the borrower or 3. 3 month after borrower getting an employment or starting a business or 4. 3 month after borrower discontinuing the educational program, whichever is earlier. * The principal and interest is repayable in 90 monthly installments * Monthly repayment amount will be deducted from the bank account of the borrower/co-borrower using Electronic Clearing System (ECS) * Post Dated Checks (PDC) to be collected as security cheques from the borrower/co-borrowers | Collateral| The following types of collateral are accepted 9. Non-Agricultural Land 10. House 11. Apartment/Flat 12. A life insurance policy for the student, assigned in favor of Credila, for the value of at least the amount of loan approved * | Process:| | 1. Student: To complete Credila's online Education Loan Application Form 2. Credila: To follow-up with the student & parents to answer questions 3. Credila: Representative visits your house & collects signed application form with the supporting documents 4.
Student: To provide a completed Education Loan Application form with all the required supporting documents 5. Note: Students can apply to Credila for Education Loan even before confirmed admission or Form I-20 or before Visa 6. Credila: Credit team to review & underwrite the Education Loan application 7. Credila: To approve the education loan or ask for any additional information required 8. Student: To complete the education loan disbursment formalities by signing the education loan agreement 9. Credila: The education loan amount is deposited in the required bank account electronically | Documents:| | | 1. Fully Completed and Signed Application Form| * | 2. Two Passport Size Photos - Applicant and Co-Applicant| * One set to be pasted on the Application Form and second set to be affixed (stapled) to the Application Form | 3. Photo ID - Applicant and Co-Applicant (Any one of the following)| * PAN Card * Passport * Driving License * Voters ID * Employee ID * Photo ID issued by the Central Govt. or State Govt. * Bankers Verification/ Bank Passbook with photograph of account holder attested by bank | 4.
Residence Proof - Applicant and Co-Applicant (Any one of the following)| * Passport With Address * Bank Statement With Address * Driver's License with Address * Utility Bill (Not older than 3 months) * Telephone Bill (Not older than 3 months) * Ration card * Latest LIC Premium Receipt (Not older than 3 months) * Leave and License Agreement supported with an address proof / utility bill in the name of the landlord * Voter's ID card | 5. Academic Documents of Student| * Marksheet/Certificate of 12th Exam * Marksheet/Certificate of Subsequent Years of Education e. g.
BE, BCom, BSc, etc. * Marksheet of Any Entrance Exam Taken e. g. CAT, CET, etc. (If applicable) * GRE/GMAT/TOFEL/LETS, etc Marksheets For US Applicant * Scholarship Documents (if applicable) | 6. Proof Of Admission (If available)| * Printed Admission Letter From the Institute on its Letterhead With Institute's Address * I-20 Form for the USA Applicant | 7. Last 8 Months Bank Statements of Co-Applicant (If more than one bank account, provide copies of all) Make sure to include the bank statements of the Bank Account where Salary or Business/ Professional receipts are credited every month. | | 8.
Income Proof of Co-Applicant | * In case of Salaried Employee (All the following) * Latest 3 Salary Slips or Salary Certificate on Employer's Letterhead * Last 2 year's Form 16 from Employer or Last 2 Year's Income Tax Returns * Any Other Income Proof That is Not Reflected in the Above Documents * In case of Self Employed or Professional (All the following) * Last 2 Year's Income Tax Returns * Last 2 Year's Certified Financial Statements or Provisional Financial Statements Duly Certified by CA * Proof Of Office (any one of the following, Lease Deed, Utility Bill, Title Deed, etc. * Any Other Income Proof That is Not Reflected in the Above Documents | | | | | 9. If, Collateral - Life Insurance Policy (All the Following)| * Copy of the Life Insurance Policy * Copy of the Most Current Insurance Premium Receipt | 10. If, Collateral - Immovable Property (Flat, House, Non-Agriculture Land) (All the Relevant Documents from the Following List)| * Property Title Deed * 7 / 12 extracts in case of land * Registered Sale Agreement Along With Society Share Certificate * Original Registration receipt for the above agreement * Allotment Letter By Municipal Corporation / Authorized Govt.
Authority Like MHADA, CIDCO, etc. * Commencement Certificate from Municipal Corporation/Council * Previous Chain of Sale Deed establishing title * Any other document as prescribed by our empanelled lawyers or chartered engineers from time to time | 11. All the copies of the above provided documents should be self-attested| | | |
