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The education loans by NBFCs would grow moderately but still be healthy as compared with the previous fiscal year, the agency said.
Despite the high growth, asset quality in the education loan segment continues to be benign due to a low level of non-performing assets (NPAs) on account of the protective structural features underpinning these loans, the rating agency said.
The AUM growth in FY21 was flat owing to the Covid-19 pandemic, which stalled international travel. In the same year, the number of students travelling abroad for higher studies had dropped by over 50 per cent YoY, to 260,000.
The agency said that more than 90 per cent of the education loans availed are for international studies, while India-based courses account for the rest.
While the number of Indian students travelling abroad for higher studies is expected to continue to rise, growth rates may moderate due to the higher base effect and subdued global economic growth landscape and the attendant layoffs, particularly in the technology sector, CRISIL said in the release.
“Inherent structural features of the business model include a compulsory co-borrower (a parent in most cases), a focus on science, technology, engineering, and mathematics (STEM) courses that have a better track record of employability, and structured repayment terms, with loans typically moving to full equated monthly instalments (EMI) towards the end of the course tenure and coinciding with job placements. These have supported the asset quality of education loan NBFCs so far, with the gross NPA remaining below 0.5 per cent during the pandemic,” said Ajit Velonie, senior director at CRISIL Ratings.
The collection efficiencies for these portfolios remained stable even during fiscal 2023 despite job losses, the agency said, adding that the prepayment rate for education loans is high within 4-6 years of loan disbursement on average, which comes from the salaries of the students after they get employed.
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