A news item in FE…

HDFC forays into education loan biz

Posted: Friday, Nov 13, 2009

( FINANCIAL EXPRESS 14th November 2009 ) New Delhi:

Country’s top mortgage lender HDFC today announced acquisition of 41 per cent stake in education loan provider Credila Financial Services — marking its entry into a specialised market estimated at over Rs 30,000 crore. HDFC is purchasing the 41 per cent equity from DSP Merrill Lynch Capital Ltd, an Indian subsidiary of global financial services major Merrill Lynch.

Commenting on the deal, HDFC’s Senior General Manager (Treasury) V S Rangan said that it was “a very small investment” at less than Rs 10 crore for the company, but marked its entry into a fast-growing market.

“Education loans provide a large business opportunity in the country with more and more people going for higher studies,” Rangan said. “The market for student loans is continuously growing… currently, it is estimated at about Rs 30,000 crore and is growing every year at a rate of 25-30 per cent,” Rangan said. Currently, the market is mostly dominated by the banks, but the requirement for student loans is growing day-by-day, he added. Rangan said the company would disburse loan for studies in India as also overseas. The deal is subject to compliance with applicable regulations, HDFC said.

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My views on above news item :

Dear Sir,

I agree that the market for education loans is growing fast but there are already so many players in the market.

HDFC needs to devise some strategy/system to keep a check on same students availing educational loans from several banks and then creating huge NPAs in this sector.

Another problem in this sector is about keeping track of students who have availed loans for going abroad but keep changing their addresses there without informing the lenders and as a result, number of defaulters arise.

Also there is need to frame two different sets of policies–one for the poorest but bright students and another for students from upper class whose parents have the means to support their children but still avail loans from banks for other obvious reasons.

Quicker disposal of loan applications but with built in monitoring system to ensure their health is very important.

J S BROCA

NEW DELHI