PSBs report 50% jump in education loans segment

For 2008-09 public sector banks (PSBs) have reported a jump of 50% in the education loans. Thus figures depict the efforts made by government to take higher education to the masses.

According to government and the Reserve Bank of India the education loan has been categorized under the priority sector lending therefore banks have been instructed to lend at least 40% of their total loans to sectors such as education, housing and small industries.

According to finance ministry official it is expected by the end of 2008-09 the education loan portfolio of PSBs will touch Rs 30,000 as against Rs 19,816 crore in 2007-08.

An anonymous official said, “This is for the first time that it has crossed the Rs 25,000-crore mark. This has been possible because of the aggressive disbursal plans of PSBs”.

According to information provided by the Indian Banks Association (IBA) as on December 31, 2008 PSBs distributed education loan of around Rs 26,303.62.

In March 2004 the figure stood at Rs 4,550 crore since then there has been of about 600% growth in education loans.

Over the years the ratio of education loans as a percentage of banks’ total advances has shown an improvement. In 2004 PSBs education loans consisted of 0.64% of the total advances. But on December 31, 2008 it doubled to about 1.25%. The loan was mostly taken for higher studies.

Member Banks of IBA have been instructed to give a rebate of at least half percentage point on interest for education loans given for the girl child.

How much mortgage can you afford?

If you are a prospective homebuyer in the mortgage market, getting an idea about how much mortgage you are able to afford would help you overcome financial difficulties. Formulating a strategy for buying your home would save you from being refused while making an application for a mortgage loan. Following are few tips that can help you precisely answer the question “mortgage how much can I borrow affordability”. Simple tools can let you know how much mortgage can you afford.

Knowing your debt to income ratio

Mortgage lenders utilize your debt to income ratio to ascertain how much mortgage you can afford. This ratio represents your debts and your monthly income by a percentage. Usually, the lenders would not like your mortgage payments to exceed 33% or 1/3^rd of the amount of your monthly income. If your other expenses (credit card debt and automobile loan payments) are included in the formula, then the sum of your monthly debt payments must not be more than 38% of the amount of your monthly income.

How to compute your debt to income ratio

While computing your debt to income ratio, it is crucial for you to only take documented income. This suggests that you require W-2 forms (wage and tax statement) and counterfoils of your paychecks for documenting your earnings. The easiest method of estimating your debt to income ratio is by picking the W-2 form amount and dividing it by 12. If this amount is multiplied by .38, then you can get the highest amount of your bills and mortgage payments possible.

You can use a mortgage calculator to figure out your payments

You are able to work out the amount of your mortgage payment on the basis of the rate of interest and the buying price of your house by means of an uncomplicated mortgage calculator. As soon as you work out the amount of mortgage payment you are able to afford, you can simply ascertain if the house is within your budget or not.

With the help of a mortgage calculator, you can also find out whether your monthly income is satisfactory to make you eligible for a mortgage loan.

State govt. scheme to help students repay loan at 6% interest rate

After the meeting, Rural Development and Panchayat Raj Minister Shobha Karandlaje in addressing media said students who have taken educational loan since August 1 for the present academic year will be benefited from the scheme announced by the state government in its budget. “Banks are offering loan at higher interest rates. But as per our scheme, students will have to repay the loan at an interest rate of six per cent. The government will take care of the rest,” she said.

She added that the benefit be available to all those students also, who wish to pursue higher education equivalent to graduation and above. Students can take loans up to Rs 5 lakh.

The government also has plans of bringing in private primary schools and high schools, which were started during the academic year 1993-94 and 1994-95, under the grant-in-aid scheme. The Cabinet has taken a decision to extend the same to private PU colleges which were started in the same period. After the announcement as many as 537 primary schools, 410 high schools and 103 pre-university colleges will get benefited of the scheme.

The government also announced that it will give Rs 2 per litre to milk producers selling milk to Milk Producers’ Cooperative Societies. Milk producers will start getting an additional Rs 2 per litre from September 9.

PSU banks cannot deny education loan to students

The students who are keen to fulfill their dreams of taking up higher education but are facing difficulty in getting education loan can directly dial finance minister P Chidambaram number or ministry officials. The government has allowed the students to directly contact the finance minister or finance ministry officials in case a public sector bank denies an education loan without giving a proper reason.

Ministry has instructed the public sector banks to make sure that criteria like location of residence or age should not be the reason for not giving the education loan to the students. ‘We have directed the banks not to create objections in issuing loans as long as the area of residence of the student and the bank branch are in the same district,’ a senior official in the finance ministry said.

In other words, an education loan application cannot be rejected by any PSU bank branch just on the basis that the residence of the student, the education institution or the guarantor is not located in the same place.

It has come into notices that at times the residence of an education loan applicant is different from that of the guarantor. “Banks usually insist that both the guarantor and the candidate should be residing under the area of the branch, which is impractical. We have issued a directive to all the banks with an aim to remove this ambiguity,” the official said.

The official said that finance minister has received letters in this regard from many students who have requested for his intervention. The official said all the genuine cases have been resolved. A senior officer of joint secretary rank has been appointed to look into all education loan-related grievances which are addressed to the finance minister or the ministry. Moreover PSU banks have also been instructed that the age of the applicant should not be criteria for rejecting education loans. According to this even a 35 or 45-year-old can apply for an education loan.

According to the directives given to banks now can no longer insist that the place of residence of the student and the college concerned should be located at the same place i.e. ‘branch area’ for availing a loan. Usually the branch area of a bank is within a radius of six to eight kilometers, although there are no set rules for it. The area can also vary from bank to bank and depending on the location. In comparison, a district area covers 30-40 kms. For the rejection of an application the genuine reason can include past record of the candidate. The pro-student rules are not applicable for courses which are not recognized by any statutory body like UGC, AICTE, the central government or a state government.

IOB hiked lending rates by 14% spared housing, education advances

Public sector Indian Overseas Bank (IOB) on Tuesday raised benchmark lending rate by 0.50 per cent i.e. to 14 per cent. The rates will come into effect from August 16. Bank has not touched housing loans up to Rs 30 lakh and education advances from the increase.

IOB said in a filing to the Bombay Stock Exchange that the existing housing loans and education loans, which are linked to BPLR, have been exempted from the present revision.

The bank sources said the fresh housing loans up to Rs 30 lakhs and fresh education loans have also been spared from the hike.

IOB sources added that existing loans under special credit scheme, where fixed rate option is applicable have also been exempted from the present revision.

Claiming deduction on education loan

I am a retired Central Government employee. For the financial year 2007-08, I have only interest income from bank and post office for which tax has been deducted at source.

Am I eligible for claiming deduction under Section 80C in respect of the investments made by me in PPF account and NSC?

My previous employer who has deducted tax on the CPF interest amount paid to me during the financial year 2007-08 has not given the TDS certificate. What is the remedy available to me in respect of the same? — Anonymous

The interest income from bank and post office will be chargeable to tax in your hands under the head income from other sources.

You will be able to claim deduction under Section 80C in respect of investments made by you in PPF account and in NSCs. Since you are a retired Central Government employee, you are also likely to have a pension, which would be assessable under the head salaries. Credit can be claimed for tax deducted at source on such incomes. Most of students looking for the education loan in India also make sure to check their hidden terms and conditions here because once you have selected the bank then it would be hard to change or switch the loan to another bank or if it would be possible then have to pay a healthy charges.

As regards the failure to receive TDS certificate from your previous employer, your only remedy may lie in informing the concerned joint commissioner who may initiate penal action for such failure under Section 272A(2).

This may at best work as some kind of a threat which may induce the former employer of yours to issue the TDS certificate. You may, however, note that Section 205 of the Act makes a specific prohibition on the recovery of taxes already deducted by the payer, from the payee, which would apply even if the payer has not remitted the tax so deducted or has not issued a TDS certificate.

This view is also supported by the decision of the Gauhati High Court in ACIT v Om Prakash Gattani [2000] 242 ITR 638 (Gau).

I am working in the US on work permit (H1 Visa). I would like to transfer some money to my savings account in India.

Do I need to pay tax for the money that I transfer to India, as I am already paying tax in the US? — Upendra S.

No tax will arise merely on the transfer of money from the US to India. You will have to examine your residential status under the Income Tax Act.

If you are a resident and ordinarily resident in accordance with Section 6 of the Act, the income earned by you will be taxable in both countries.

It may also be that the income is taxable in both countries in accordance with the Double Taxation Avoidance Agreement between India and the US, if you are a resident of India in accordance with the said agreement.

If the income is taxable in both countries, even on the basis of the Double Taxation Avoidance Agreement between India and the US, you may take the benefit of Article 25, which provides that the taxes paid in the country of source will be allowed as a credit in the country of residence. You will have to examine based on facts as to whether you are a resident of India or of the US as per the Double Taxation Avoidance Agreement and claim credit in the country of residence, the tax paid in the country of source on the doubly-taxed income.

You may note that under the Double Taxation Avoidance Agreement you are most likely to be a resident of India in which case credit should be allowed in India in respect of the tax paid in the US on the doubly-taxed income.

You may also note that the credit that would be allowed in the country of residence will be the lower of the tax payable in the country of source or in the country of residence on such doubly-taxed income.

If, however, you are a resident but not ordinarily resident or non-resident in accordance with Section 6 of the Income Tax Act, the income earned by you in the US will not be taxable in India. All these provisions will apply whether or not you transfer money into India.

I purchased a land for Rs 4 lakh on June 5, 2007, and donated the same a week later to a corporation, which is notified and approved.

Is this donation in kind eligible for deduction under Section 80G of the Income Tax Act? — Shanky Bhandari

You have in the query not stated whether the donation was made to a public charitable trust. You have stated that the donation was made to a corporation.

A donation made to a corporation will not qualify for deduction under Section 80-G, even otherwise a donation in kind will not qualify for such deduction.

SBI’s study loans cheaper

State Bank of India, the country’s largest public sector bank, has reduced interest rates on educational loans.

New rates for loan amounts less than Rs4 lakh have been reduced from 12.25% to 11.75%. Rates for loan amounts above Rs7.50 lakh have been reduced from 13.25% to 12.25%. Interest rates for amounts between Rs4 lakh and Rs7.50 lakh have remained unchanged at 13.25%.

Other banks may follow suit. Says M.P. Murugan, assistant general manager, Allahabad Bank: “We are the leader in the educational loan space. We already have special lower interest rates for IIT and IIM students, at 11.25%. However, if the need arises, we may look into reducing our rates as well.
N.R. Shet, general manager, Corporation Bank, says: “We do not have immediate plans to reduce educational loan rates, but you cannot rule out the possibility of us doing so. Our rates are not that high, so we will wait and watch.”

Any cut is, of course, good news for students. Hsoc Matthai, 17, a student from Mumbai, says: “Educational loans are necessary. My brother and I are planning to go for professional courses this year. Even a small decrease in interest rates makes a lot of difference. We would rather go to a bank that offers lower rates.”

Nationalized banks to set a new record in disbursement of education loans

Nationalized banks functioning in Ranchi zone have a hope of setting up a new record in disbursement of education loans.

By the end of February, the banks have distributed approximately Rs 25 crore to amongst more than 2,000 students. Looking at the last minute loan rush by students, they said, it is expected that the disbursement might to exceed Rs 30 crore by the end of this fiscal.

According to an official of Bank of India, have 58 branches in the Ranchi zone, said their share is about one-fifth of the total disbursement.

“By the end of February, we had given Rs 5.5 crore as loan to over 400 students. This is about 25 per cent growth as compared to the previous fiscal,” said the official, Y.P. Choudhary.

As per Canara Bank reports the bank has disbursed around Rs 5.03 crore as educational loan to 559 students by the end of February. Last year, the bank had given Rs 2.55 crore as loan to 244 students.

“This year the number of students seeking an educational loan from our bank and the amount of loan disbursed has doubled,” said Shitalanand Thakur, a marketing officer in Canara Bank.

In the fiscal there has been considerable increase in the number of Scheduled Tribe (ST) students applying for education loan.

State Bank of India, which have highest number of branches among nationalized banks, has given about Rs 7.8 crore to over 700 students.

These numbers, include loans approved for students who have managed to get admission for 2008-09 and also of those who took loans on installment.

Referring to a change in trend, Choudhary said: “Students seeking admission to relatively lesser lucrative courses such as hotel management, catering and tourism have also opted for loan.”

In fact the maximum number of loan seekers continues to be those opting for courses such as engineering, medical science and management — which attract higher salaries.

Students are also taking loans to get admissions to prestigious state-based institutions such as XLRI (Jamshedpur), BIT (Mesra), ISM (Dhanbad) and NIT (Jamshedpur).

The bankers said as per the figures the branches in urban areas have received more loan applications than the rural branches.

State Bank of India, Canara Bank, Central Bank and Allahabad Bank are among the most preferred financial institutions for educational loans.

Central Bank not likely to reduce rates

Taking a cue from its peers, state-run Central Bank of India is planning to cut rates by 25 to 50 basis points on a few retail products, but the bank has no intention to include the most sought after home loans and educational loans in the list. “As we are already giving concessions on home and education loans, there was no need to revise them downwards at this moment,” Central Bank’s chairperson and managing director, HA Daruwalla said. The bank’s home loan rate is currently at 10.5% in the fixed rate category and 9.5% in the variable floating rate structure. The rates are for loans up to Rs 20 lakh.

Talking to reporters on Wednesday, on the sidelines of Central Bank’s new agreement with Thomas Cook to offer MoneyGram international money transfer service in Mumbai, Daruwalla, said, “We can’t bring down our interest rates until our cost of funds was lowered, still, we are seriously thinking of reducing our rates within the range of 25-50 basis points on certain retail products in the near future”. Some of the retail products that are likely to see a rate-cut by the bank include Cent Trade, Cent Mortgage, and loans being provided to sectors like SME, SSI, and cold storages.

On the strategic alliance with Thomas Cook, Daruwalla said that in addition to increasing the bank’s fee-based income, the agreement would also strengthen their customer base, which was hovering around 2.5 crore at present.

Now get education loan online at BOM

On the eve of the New year Bank of Maharashtra has launched online sanction of Education Loans.

With a view to provide impetus to education, quick financing to the younger generation, the Bank has launched an On-line sanction of Education loan through its select branches across the country. Any student can apply for education loan by logging on to the Bank’s website and submitting the application online. The student will get auto reply and sanction in principle On- line. The student can avail the loan after completing the formalities at the concerned branch.

Under Education loan scheme, a student can avail upto Rs.10.00 lacs for studies in India and upto Rs.20.00 lacs for studies abroad.

Bank of Maharashtra with its motto- ‘One family One Bank’ takes up this task of providing an opportunity to the family for providing education to their children.

Coincidently, this has come at a time when the Honorable Prime Minister on Friday the 28th December 2007 termed the 11th year plan as ‘India’s educational plan’.

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