Government sets up two funds to underwrite education loans

The government has finally set up a pair of credit guarantee funds that will underwrite up to 75% of the value of loans extended to students—a move it expects will make banks shed their reluctance to offer educational loans. The education credit guarantee fund has a corpus of Rs. 35 billion and the skill education credit guarantee fund has been endowed with Rs. 10 billion, three government officials said on condition of anonymity. They will start offering guarantees for student loans starting in January 2014.

There is also a stipulation that the interest rate charged by banks for education loan cannot be more than 2% over the existing base rate of the bank. A plan to set up such funds was announced by then Finance Minister Pranab Mukherjee in his 2012-13 budget speech to improve the comfort level of banks in extending student loans that are perceived as risky and potentially contributing to non-performing assets (NPAs).

The Department of Financial Services of the Ministry of Finance and the Ministry of Human Resource Development (MHRD) have been discussing the proposal for almost two years. “With a guarantee in place, banks will now be more forthcoming to lend to students. The initial corpus will be Rs. 35 billion,” said a government official, one of the three cited above.

The size of the twin funds has been pared from an originally planned Rs. 50 billion. The MHRD will soon set up a panel to chalk out details of implementing the plan, the official said. For underwriting a loan, the credit guarantee fund can charge the banks a fee up to a maximum of 1% of the loan amount, said a second government official. While all higher education loans of up to Rs. 750,000 will be eligible for the guarantee, skill education loans up to Rs. 150,000 will be underwritten.

“The Cabinet approved both the funds two weeks back but it has not been announced yet, as it was election time,” said the first official, referring to just concluded elections in five states. “We have been getting several complaints from needy students about banks’ lukewarm response towards education loans but we believe from now on this will change.”

Although education loans have grown significantly over the years, slowing economic growth and a poor jobs scenario since 2008-09 have fuelled concerns among bankers about the repayment capability of fresh graduates. Over 5% of student loans outstanding had turned bad by March-end, up from 2% in 2008, according to government data.

“Any student taking a loan for higher studies does not plan to default by choice. It’s the circumstance or job scenario that forces some to delay the repayment, but banks always hesitate to lend to students,” said Ashok Sarangi, a student in Delhi preparing for an MBA course. “I don’t know much about the credit guarantee fund but what many students like me wish is cooperation from banks. The cost of education has gone up and loan has become almost a necessity for many,” he said.

Educational loans grew by 8.5% in the last one year, half the pace at which the overall priority sector loans grew. The priority sector comprises of several segments including education, housing, agriculture, and micro and small scale industries. As of March 2013, banks had 2.51 million education loan accounts, with a total outstanding of Rs. 535.20 billion.

The funds will be set up under a national credit-guarantee trustee company, an umbrella vehicle that will be responsible for the operations of both. However, both funds will have their own managing committees to decide on their policies. While the managing committee for education loans will be headed by the MHRD with representatives from the ministry of finance, banks and a sector expert, the committee at the skill development fund will be headed by the Ministry of Finance with representatives from the Ministry of Labour, the second official said.

Of the Rs. 35 billion approved for the educational loans guaranteed fund, the government will spend Rs. 5 billion in the remaining months of this fiscal and the remaining Rs. 30 billion will be progressively used over next few years. Similarly, the skill education fund will use Rs. 5 billion in this fiscal year and the rest in the next.

Source: Mint, December 11, 2013

IIM fees trebles in 5 years

The cost of the priceless MBA degree from the prestigious Indian Institutes of Management (IIMs) has more than trebled in the past five years, after yet another round of fee hikes this year. From Rs. 5 lakh (Rs. 500,000) or less for the class of 2009, fees at the IIMs in Ahmedabad, Calcutta and Bangalore have risen to Rs. 1.35-1.55 million for the class of 2014, according to data collected from top B-schools.

Students signing up this year face a 7% increase in fees at IIM-Ahmedabad and a 15% increase at IIM-Bangalore. Other institutes such as Indian Institute of Foreign Trade (IIFT) and XIM-Bhubaneswar have also raised fees by 15-16%.

IIMs have increased class capacity by 54% after the Ministry of Human Resource Development (MHRD) directed them in 2008 to implement 27% reservation for other backward castes (OBCs). “The cost of infrastructure has been one of the major reasons for the fee hike since the OBC quota implementation meant that student numbers were increasing dramatically,” said Pankaj Chandra, Director, IIM-Bangalore.

New facilities to be set up
“We need to set up new facilities and provide better resources to enhance the quality of education,” said Pankaj Chandra, Director, IIM-Bangalore. Different IIMs rolled out the 54% increase in seats over three years in different ways. For instance, IIM-A increased the number of seats from 250 to 385 over the three-year period. Though the increase was spread out, B-schools have had to expand existing infrastructure, including classrooms, hostels and other facilities.

“If we don’t increase fees we might be able to meet our operational expenses, but it won’t be enough for capex,” said Ashok Banerjee, Dean (New Initiatives & External Relations), IIM-Calcutta. IIMs in Lucknow, Rohtak, Ranchi and Kozhikode and Indian School of Business (ISB), Hyderabad have not increased fees this year.

Some B-schools have waiver schemes for financially weak students. At IIM-A, for instance, around 25% of the students in the first year (class of 2013) received some form of fee waiver this year. At IIM-Calcutta, 22% of the students have received waiver. Conversely, this increases the bill for those who are able to pay.

Source: The Economic Times, April 12, 2012

With education fairs, India woos Sri Lankan students

India is promoting itself seriously as an education destination in Sri Lanka, with a series of initiatives. Three education fairs were organised this financial year as part of a ‘Study in India’ campaign, coordinated by the Indian High Commission here.

“India being Sri Lanka’s closest neighbour, the travel expenses involved are much less. The culture is almost identical and India offers high quality education at a fraction of cost compared to many other countries,” said Shaik Suleman, General Manager of EdCIL (Educational Consultants India Limited). It is a Government of India Enterprise mandated to promote and develop education in India and abroad.

Finding a seat in a university in Sri Lanka is a tough task for a student for, there are only few universities. According to Sri Lankan government estimates, about 10,000 students go abroad for studies. But this number could be much higher since there is no streamlined manner of gathering their statistics. India hopes to attract at least half of the 10,000 students given its various advantages.

Right now, Australia is the most preferred destination: last year about 2,000 students headed there. The year before, this number was 3,500. The numbers dropped because of the government crackdown on fly-by-night educational institutions, and the introduction of a tougher visa regime. On an average, about 1,500 students head for India. This estimate is based on the number of student visa applications that the Indian High Commission has given out in the past few years.

India has a plethora of recognised professional colleges which could accommodate students from abroad. This has been the focus of all the three exhibitions here, including the latest “Indian Education Fair” held in Colombo from February 17 to19. It showcased over 20 of the most reputed Indian institutions representing more than 100 colleges. The participating institutions offer courses in Science, Medicine, Dentistry, Engineering, Architecture, Business, Economics and Humanities, in addition to Films and Acting.

“India has also increased the number of scholarships by nearly three times, to reach 270 scholarships, and also has highly subsidised self-financing slots, which would be available from the current year,” said Indian High Commissioner to Sri Lanka Ashok K. Kantha. “These scholarships would be funded by India under a grant assistance amounting to 2.5 billion Sri Lankan Rupees, to be spent over a three-year period,” he added.

Source: The Hindu, February 19, 2012

Germany looking for collaborative research with Indian institutions

Ingrid Krussmann, who has recently taken up additional responsibility of South Asia including India, for DFG (German Research Foundation), outlines her key priorities.

In a globalised world, the need of the hour is international collaborations along with a global research base. With this in mind, DFG (German Research Foundation) utilises the international research training groups (IRTGs) as a vehicle for ensuring research collaboration. Two of them have already been established in India with University of Hyderabad collaborating with University of Muenster in 2009 and Free University of Berlin in 2010.

IRTGs provide opportunities for joint doctoral training programmes between German and international universities within a group of up to 25 PhD students. Each student is required to work for a minimum period of six months in the partner country. As far as funding is concerned, DFG is the central, self-governing organisation, responsible in Germany.

According to Ingrid Krussmann, who has recently taken up additional responsibility of South Asia including India for DFG, her current focus will be on quality research, with an added impetus on promoting cooperation between Indian and German institutions.

On a smaller scale, Krussmann says, the effort will also be to increase the number of scientists visiting India. In Germany, many scientists are unaware of the possibilities of research in India. My efforts would be directed on increasing the knowledge about the scientific landscape on both sides, she adds.

A new study, to be released by DFG in 2011, focuses on the joint publications of Indian and German scientists between 2004 and 2009. It reveals that there have been significant collaborations in some branches of physics, biochemistry and material sciences. In humanities, the collaboration has been in subjects like Indology, sociology, etc., with India as the subject of research.

Currently, the two Indian partners of DFG in India are the Department of Science and Technology (DST) and the Indian National Science Academy (INSA). We are trying to identify other Indian organisations for initiating and implementing joint research projects, says Krssmann.

In the long run, the challenge would be to set up joint collaborative research centres in Germany and India. Collaborative research centres are university-based and are in operation for a period of up to 12 years, in which scientists and doctoral students from both countries pursue inter-disciplinary research.

Further, the year of Germany in India, 2011-12, will include conferences, symposia and activities, thus facilitating effective synergy between the two countries. It will also witness the inauguration of the German House of Science and Innovation in Delhi where DFG and German Academic Exchange Service (DAAD) are the coordinating partners. The idea of creating this house, Krussmann adds, is to bring all German academic and scientific organisations and funding bodies under one roof and present a concerted front to the Indian public.

Source: Education Times (The Times of India), October 3, 2011

AICTE told to consult States with surplus seats before sanctioning engineering colleges

The Union Ministry of Human Resource Development (MHRD) has asked the All India Council for Technical Education (AICTE) — the apex regulatory body for engineering colleges — to consult the States before giving permission for setting up new colleges.

According to Human Resource Development Minister Kapil Sibal, the AICTE would ask the State governments with a surplus of vacant seats whether recognition should be given to more engineering colleges in their State. He said this while addressing Members of Parliament at a meeting of the Parliamentary consultative committee.

Inter-region variations
This move is to address the wide inter-State and inter-region variations, particularly the location of engineering schools. While some States, particularly the southern States of Tamil Nadu, Andhra Pradesh and Karnataka, and Maharashtra in the west have surplus seats, States in the eastern and North-Eastern region are underserved.

Over 70 per cent of the capacity in degree-level engineering education is concentrated in four States — Tamil Nadu, Andhra Pradesh, Karnataka and Maharashtra. The States in the past have protested against the lack of a consultation process while sanctioning new engineering and management colleges.

One area of concern common to many Members of Parliament was that the envisaged expansion of higher education should not result in a heightened rural/urban and rich/poor divide as also a divide among those who can speak English and those who cannot.

Poor student-teacher ratio
The members also said that until the standard of the secondary and higher secondary education sector, especially in government schools, was not improved the poorer sections would not be adequately prepared for good quality higher education.

Another concern was over the poor teacher-student ratio in colleges and declining standards of college education. A suggestion was made by some Members of Parliaments that the Centre should set up a Centrally-run college in every district of the country in the manner of Kendriya Vidyalayas or Navodaya Vidyalayas.

Common entrance test
The committee also discussed the proposed common entrance test for engineering students. At its recent meeting, the IIT Council agreed to the idea of a common admission test for all engineering schools from 2013, if States agreed to the idea. Admissions would take place on the basis of an all-India merit list, which will be prepared based on the combined weightage given to class XII exam and the common test.

The test will examine a student’s logic and non-subject matters. Weightage would be given to the marks obtained in class XII boards after the results are equalised for which Indian Statistical Institute will put in place a mathematical formula for equalisation.

The Indian Statistical Institute’s formula would be based on the data of various boards collected over the past four years to make it an efficient equalisation model.

Source: The Hindu, October 1, 2011

Government funds 80% IIT expenses, students pay back a fraction

Over 80 per cent of the financial needs of the Indian Institutes of Technology (IITs) and their entire capital costs are currently funded by the government. The tuition fee collected from a BTech student is Rs. 200,000 over four years; the expenditure is about Rs. 800,000. The over-dependence on government funds, coupled with the widening gap between actual costs incurred and tuition fee charged, has long been considered a major deterrent to the IITs’ efforts at financially independence. This is one of the key aspects cited in a government report. The IIT Council has now recommended a conditional fee hike to Rs. 200,000 yearly, subject to approval by the Union Ministry of Finance.

“The root of the autonomy challenge lies in the inability of the IITs to be financially independent… Being largely funded by the government, the IITs are subjected to government spending regulations and audit. The IITs’ ability to invest is also constrained by the spending curbs of the government. This has put the IITs at a disadvantage compared to many reputed universities around the world which have full financial autonomy,” said the report, filed by a committee appointed by the Minstry of Human Resource Development (MHRD).

The revenue sources of the seven best established IITs include student fees, government receipts, investments and others (entrance exam fee, library fee, sponsorships etc). Their total operating revenues was Rs. 942 crore (Rs. 9.42 billion) in 2009 and Rs. 1,283 crore (Rs. 12.83 billion) in 2010, with 82 per cent coming as grants from the government. The return on endowments and investments as well as donations from alumni account for about three per cent of the operating revenues “as against 10-40 per cent for top US universities”. Experts said increasing the tuition fee is just one way of raising funds. “Industrial consultancy and generation of income from IPR are two areas where the IITs must concentrate more,” said an IIT-Bombay alumnus.

The committee had also recommended that all ministries provide a minimum of 20 per cent overheads without a ceiling on the research and development projects sanctioned to the IITs. “This is necessary to avoid strain on institute resources as they undertake enlarged R&D activities. Most US universities charge overheads to the tune of 50 per cent. Industrial consultancy and royalty, alumni and industrial grants/donations and continuing education programmes, would be some other modes for enhancing IIT finances,” the report said.

Source: The Indian Express, September 20, 2011