In a move to stay connected with students and to refrain from bad loans, the State Bank of India (SBI) has come up with the scheme of offering credit cards along with education loans .
The largest bank of the country expects students to make use of the credit cards and payment of dues to build up credit history. This in turn will give clue on the borrower’s credit behavior.
Arundhati Bhattacharya, Chairperson- SBI, quoted “We were having a lot of nonperforming assets (NPAs) in education loans. So, now we have created a credit card along with the education loans”. She also added that the credit card has a limit of INR 5,000 which is guaranteed by the parent.
To put it simply, the student will use the credit card to repay the loan and in the process the bank will stay connected with him.
The chairperson also pointed out that earlier once the bank lends the education loan, it was no longer in the picture and the student too seemed to forget completely about it. But along with credit cards come the concept of monthly bills and the banks can track the person.
Even when the student-borrower completes his education and takes up a job, the bank expects him/her to continue using the card. “So, we can continue to track him. And in the meanwhile, he is building up a credit history which will enable us to credit once he goes a job”, said Bhattacharya.
The SBI education loan portfolio stands at INR 14, 945 crore as on June end, 2014. The figure is up by 7.21 percent year-on year.
Meanwhile, parents who open accounts under the bank’s two recently launched savings bank products for children can take the opportunity of an overdraft. The overdraft can be to the extent of a child’s fee and should be repaid within six months.