Banks propose easing top up of study loans for higher studies
RBI) accepts a proposal submitted by banks to reclassify the first unpaid education loan as 'standard' and to extend the repayment period.
Banks argued, in a representation to the RBI in September, that this will help the borrowers who opt to gain some work experience after an initial degree before pursuing higher studies.
Under the existing norms, lenders have to classify an existing loan as 'restructured' if it is partly repaid by a borrower. This results in higher interest rates for the borrowers if they take a fresh loan.
«If a borrower takes an education loan and starts to repay it after the end of the moratorium period, it is difficult to secure another loan without repaying the existing education loan in case the borrower decides to pursue further studies,» said a bank executive, who did not wish to be identified.
Banks said in their representation to the RBI that in such cases the repayment or moratorium period of the first loan should be allowed to be realigned with the repayment period of the second loan.
«If the regulator accepts this, then the existing loan will not be treated as a restructuring and the account will continue to be a standard asset,» said the executive.
