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Monday, September 22, 2014

Now, SBI’s education loans come with credit cards

State Bank of India is offering credit cards along with education loans to students to stay connected with them and to keep bad loans down.

India’s largest bank is expecting the usage of the credit card and payment of dues by students to build up credit history, giving it a clue on the borrower’s credit behaviour.

SBI Chairperson Arundhati Bhattacharya said, “We were having a lot of non-performing assets (NPAs) in education loans. So, now we have created a credit card along with the education loans.”

The credit card has a credit limit of Rs5,000 which is guaranteed by the parent, she added.

“Now what happens is the child starts using the credit card. He learns to use the credit card and repay the loan. And also, through the credit card we remain connected with him,” said Bhattacharya.

She pointed out that earlier once the bank gave the education loan it was no longer in the scene and the student forgot all about the bank. “But if there is a credit card, there is a monthly bill, so we remain connected with that person,” said the SBI chief.

And even when the student-borrower completes his education and takes up a job, the bank hopes that he/she will continue to use the card. “So, we can continue to track him. And in the meanwhile, he is building up a credit history which will enable use to give credit once he goes into a job,” said Bhattacharya.

As at June-end 2014, SBI had an education loan portfolio of Rs14,945 crore, up 7.21 per cent year-on-year.
Overdraft facility

Meanwhile, parents, who open accounts under the bank’s two recently launched savings bank products for children, can avail themselves of an overdraft to the extent of the child’s fee and repay it in six months.

“Now we thought that this is a good thing to do because many schools are insisting on upfront payment either every quarter or twice a year. This becomes a major burden on parents because the school fees have gone up,” said Bhattacharya.

Source : The Hindu


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