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Banks have put student loans on the last bench and yet overall disbursal of such loans is rising. Here’s why

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Saptarshi Mukherjee had planned to attend a computer science programme at a California-based educational institute in 2019. The course fee was approximately Rs 40 lakh a year but Mukherjee presumed it wouldn’t be tough to secure an education loan for a programme in the US. He was mistaken. Three banks — two public sector banks and one private bank — rejected his application as his family lived in rented accommodation.

Ashna Sharif, now pursuing an architecture postgraduate course in London, said that two banks — one public sector and one private — had raised questions about her failing one year during her degree programme, which was due to her falling ill, and rejected her loan request.

With the financial position of Indians worsening amidst the pandemic, hopes of students getting a bank loan are turning bleak. So, many candidates are now pursuing other options to raise funds.

Saptarshi Mukherjee’s father finally decided to take a Rs 25 lakh personal loan from a non-banking financial company at a 13 percent interest rate. The rest came from their personal savings and hypothecation of gold jewellery. “We had kept aside a Rs 7 lakh corpus for medical emergencies, which has now been used for Saptarshi’s education,” said his father Badrinath Mukherjee.

Ashna Sharif’s parents took a gold loan since the banks were in no mood to lend. “It is almost as if they are looking for an excuse to reject the loan application,” she told Moneycontrol. The family took a Rs 15 lakh gold loan at an interest rate of almost 12 percent. The hope is that she will be able to find employment by 2021 and repay the amount.

On the back bench

Reserve Bank of India (RBI) data on sectoral deployment of bank credit shows that there has been an 8.43 percent decline in education loan disbursal (excluding priority sector lending) as of June 2020 to Rs 65,017 crore, compared to the highest level of Rs 71,000 crore, in November 2016. This is a year on year decline of Rs 2,583 crore or 3.8 percent.

RBI data for sectoral deployment of bank credit shows the exact quantum of loans given by these institutions to various sectors. Here, loans for educational purposes have seen a consistent decline and have now flattened to around Rs 65,000 crore.

Edu loan RBI

For students this is tough because specialised higher education programmes in India and any course abroad cost upwards of Rs 10 lakh.

With banks out of the reckoning, students and their families are turning to other financial institutions, gold loans, dipping into the retirement corpus, part-time jobs and crowdfunding.

Pritam Saxena, from Gwalior, was able to raise Rs 2 lakh for his sister Anchal’s hotel management course within four weeks through on online platform. He said that the family did not have any collateral to place for a bank loan and hence they were forced to take this option.

Ramesh Srinivasan, from Chennai, who will be flying to Italy to pursue a course in Design in 2021, has started working to build a corpus of Rs 20 lakh, which he will require immediately. “Based on my interaction with the alumni, I have shortlisted two part-time jobs which will help me pay the mess fees. I have applied for a 40 percent scholarship and in case that doesn’t work out, I will start doing freelance jobs on website development, in which I have some experience,” he added.

Rise in delinquency

While there has been no decline in the number of students pursuing higher education and specialised programmes, banks are wary of the dwindling employment prospects of students and hence the rise in defaults.

“We have seen a rise in delinquencies by students and hence loan disbursal has been very selective. There is a consensus among bankers that loans should be restricted to the top institutes that have a good track record for employment,” said the general manager of a mid-sized public sector bank.

While industry data for FY20 are not available, banking sources said that education sector NPAs stayed close to 8.3 percent for the quarter ended March 2020. This is an almost 100-basis-point jump since March 2017.  

And yet, while banks are going cautious, overall education loan disbursals have increased. Data from CRIF High Mark showed that the education loan book, which includes banks, NBFCs and other financial institutions, stood at Rs 92,711 crore at the end of March 2020. The figure at the end of FY19 was Rs 90,345 crore.

There has also been an increase in the average ticket size of education loans, from Rs 3.94 lakh in FY19 to Rs 4.31 lakh in FY20.

However, there has also been a rise in delinquency or delays in payment of the loan interest. CRIF High Mark data showed that 7.19 percent was the delinquency beyond 360 days at the end of FY20. This meant that 7.19 percent of the education loan book had seen payment delays of one year and above.

This delinquency rate stood at 5.86 percent in the year-ago period, CRIF High Mark data showed.

“Since May-June 2019, we have seen a rise in payment delays by education loan customers. This is making it riskier to lend to this segment,” said the head of personal loans at a private bank.

A rise in delinquencies has also led to banks to seek more documentation and detailed academic records, which has played a dampener for students.

Other lenders step in

With banks not viewing education loans as an attractive segment, customers are gravitating towards other financial institutions.

Amit Gainda, Chief Executive Officer, Avanse Financial Services, told Moneycontrol that education is an essential spend in every household.

“Avanse Financial Services takes a student-centric approach rather than depending only on the co-borrowers’ financial background. As a part of this approach, we evaluate the student’s profile: past academic performance, entrance test scores, university/institute ranking and course selection,” said Gainda.

Gainda added that through this approach, the company is able to assess the employment potential of the student.

Student aspiring to study at an Indian Institute of Management or Indian Institute of Technology will be easier to secure an education loan from a bank. However, a traditional bank would be unwilling to provide a loan for unconventional courses like music, animation or photography.

That is where players such as Avanse Financial Services come into the picture. Gainda said the company lends to students pursuing both traditional and non-traditional programmes.

With loan moratoriums being granted amidst the pandemic and students defaulting due to no placements in 2020, it is unlikely banks will return to lending aggressively to the education sector. More and more students may therefore have to explore non-bank funding options.

Gujarat top tax-compliant region in India, Bihar comes last

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Gujarat has become the highest tax-compliant state in the assessment year 2018-19, behind only Delhi, in terms of the proportion of ‘returns filed to PAN holders’, while Bihar saw the lowest rate of Income Tax Return (ITR) filing.

In AY19, the state witnessed 22.3 percent ITR filers, out of the total Permanent Account Number

The state was followed by the national capital, which had a 20.5 percent population filing ITR. Behind Delhi were Punjab with 16.74 percent, and Telangana with 16.68 percent ITR filing, said the report.

As per the report, Bihar received the lowest rate of ITR filing at 5 percent. Its neighbouring state Uttar Pradesh saw a little higher rate of return filed at 8.11 percent. However, it was much below the national average of 12 percent, it stated.The data of ITR filings may not be the most accurate indicator of tax-compliance, as it is not mandatory for all PAN holders to file returns, said the report.

In the case of companies and businesses, they are supposed to file ITRs even in case of ‘nil’ income. However, this is not applicable to individuals as only those with total income above Rs 2.5 lakh are required to file returns. For senior citizens, the limit is Rs 3 lakh, the report suggested.

Among the total filed ITRs in AY19, the cases picked up for scrutiny halved to 0.25 percent from 0.55 percent in AY18. Among all the states, Bihar had the lowest proportion of such cases at 0.08 percent. The state saw a sharp drop from the 0.42 percent in AY18, said the report.

Its neighbouring state Jharkhand was next at 0.09 percent cases picked up for scrutiny in AY19. It saw a decline from 0.3 percent in AY18, the report stated.

Delhi faced the highest scrutiny of cases at 0.52 percent, added the report.

Gujarat top tax-compliant region in India, Bihar comes last

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Gujarat has become the highest tax-compliant state in the assessment year 2018-19, behind only Delhi, in terms of the proportion of ‘returns filed to PAN holders’, while Bihar saw the lowest rate of Income Tax Return (ITR) filing.

In AY19, the state witnessed 22.3 percent ITR filers, out of the total Permanent Account Number

The state was followed by the national capital, which had a 20.5 percent population filing ITR. Behind Delhi were Punjab with 16.74 percent, and Telangana with 16.68 percent ITR filing, said the report.

As per the report, Bihar received the lowest rate of ITR filing at 5 percent. Its neighbouring state Uttar Pradesh saw a little higher rate of return filed at 8.11 percent. However, it was much below the national average of 12 percent, it stated.The data of ITR filings may not be the most accurate indicator of tax-compliance, as it is not mandatory for all PAN holders to file returns, said the report.

In the case of companies and businesses, they are supposed to file ITRs even in case of ‘nil’ income. However, this is not applicable to individuals as only those with total income above Rs 2.5 lakh are required to file returns. For senior citizens, the limit is Rs 3 lakh, the report suggested.

Among the total filed ITRs in AY19, the cases picked up for scrutiny halved to 0.25 percent from 0.55 percent in AY18. Among all the states, Bihar had the lowest proportion of such cases at 0.08 percent. The state saw a sharp drop from the 0.42 percent in AY18, said the report.

Its neighbouring state Jharkhand was next at 0.09 percent cases picked up for scrutiny in AY19. It saw a decline from 0.3 percent in AY18, the report stated.

Delhi faced the highest scrutiny of cases at 0.52 percent, added the report.

Rajnish Kumar says government, corporates must work together for quick economic recovery

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The government and corporates must work together for a quick economic recovery, State Bank of India Chairman Rajnish Kumar said, adding that investment in infrastructure, in particular, should be stepped up.

“The government and corporates have to open up their wallets to invest … their actions should go hand-in-hand for a quick economic recovery since the vital middle class remains cautious amid ongoing unlocking of the economy,” 

Kumar added that increase in expenditure by both parties is “important” as money brought into the system will give consumption demand and infrastructure investment a boost. He also noted that direct benefit transfer schemes had put money directly in the hands of people, thus boosting rural demand.

“The middle class also plays a pivotal role, and for that segment to spend, the fear of COVID-19 has to go away,” he said.

The state lender's chief added that since the loan moratorium achieved its limited purpose, the Reserve Bank of India (RBI) now has to look at providing banks with restructuring relief “which would then determine who would qualify for a loan recast.”

“There is growing consensus that moratorium may not be needed, but there should be flexibility in loan repayments through restructuring and relaxing of provisioning norms for such rejig,” he noted and pointed out that the industry and bankers are keen to revive cash-strapped businesses and “future course of action should be left to the bank and the borrower.”

While economists have forecasted up to 10 percent contraction in GDP, Kumar was optimistic, stating that June saw fairly good recovery and many industries have “come back 75-80 percent of capacity utilisation levels.”

He, however, acknowledged that the lockdown has disrupted supply chains as some sourcing units may be in containment areas. “Overall, I believe we are in a much better position than where we were in April and May,” he said.

Dollar Down Amid Fresh Doubts Over U.S. Recovery

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The dollar was down on Friday morning, touching two-year lows and on its way to posting its biggest monthly decline in a decade as fresh doubts over the U.S economy’s recovery from the COVID-19 pandemic creep in.

These doubts have led investors to question the dollar’s strength. Data released on Thursday showed that the U.S. economy contracted by 32.9% in the second quarter and that 1.434 million unemployment claims were submitted in the week ending July 25.

On the political front, Republicans and Democrats are also no closer to reaching consensus on the latest stimulus measures, with only one more day left before some earlier measures expire on Friday.

Ever-rising numbers of COVID-19 cases also continue to pose a challenge to the U.S.’ economic recovery. The country reported almost 4.5 million cases as of July 31, according to Johns Hopkins University data, and continues to hold the dubious honor of recording the highest number of COVID-19 cases globally.

“At the root of the dollar’s weakness is the fact, which was highlighted by Fed Chairman (Jerome) Powell the other day, that U.S. coronavirus cases started to increase in mid-June, curbing consumption and sending the economy downhill,” Daisuke Uno, chief strategist at Sumitomo Mitsui (NYSE:SMFG) Bank, told Reuters.

Meanwhile, U.S. President Donald Trump added to the dollar’s woes on Thursday after he floated the idea of delaying the U.S. presidential elections, currently scheduled for November 3. But the proposal was immediately rejected by Congress, the sole governmental authority that could make such a change.

“The mere suggestion by Trump of a delay does play to concerns that the election result will be challenged in November (should Trump lose), and that, because of the likely larger than usual share of votes via mail in ballots due to the pandemic, we might not now (get) the result on election night itself,” Ray Attrill, Head of FX Strategy at National Australia Bank (OTC:NABZY), told Reuters.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies slipped 0.28% to 92.645 by 9:53 AM ET (2:53 AM GMT).

The USD/JPY pair was down 0.45% to 104.25.

The AUD/USD pair gained 0.34% to 0.7218 and the Dow Jones New Zealand (USD) pair was up 0.04% to 0.6701.

The USD/CNY pair slid 0.30% to 6.9870. The country’s National Bureau of Statistics said that the official manufacturing purchasing managers’ index (PMI) for July was 51.1, indicating expansion in factory output.

The GBP/USD pair gained 0.29% to 1.3131.

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RBI Monetary Policy | Experts see MPC opting for a further rate cut to revive growth

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Notwithstanding the rise in inflation of late, the Monetary Policy Committee may go in for another rate cut at its August's policy review to revive the economy, Barclays said on July 30.

The foreign brokerage analysts confirmed that the high inflation is adding confusion to the Reserve Bank of India's policy outlook, but pitched for a 0.25 percent cut to generate demand urging the central bank to "throw caution to the wind."

The Consumer Price Index (CPI) based retail inflation, surpassed the upper end of the RBI's target of 6 percent in June.

As per government data, retail inflation had increased to 6.09 percent in June, mainly on account of higher prices of food items. RBI mainly factors in the retail inflation while deciding its bi-monthly monetary policy.

The central bank has cut rates by a steep 1.15 percent in two actions since the onset of the COVID-19 pandemic, which has adversely affected the economy.

A slew of other measures, especially to ensure greater liquidity, have also been introduced by RBI.

"We forecast the RBI will continue easing, by cutting the repo rate at least 0.25 percent at its next policy meeting," the analysts said, ahead of the meeting of the monetary policy committee to be conducted between August 4 and 6.

They added that the impact on the activity favours more easing measures rather than less, and for having the cuts faster rather than at a deliberate pace.

"We do not believe the argument of saving 'ammunition' for future cuts holds water, given the inherent lags in transmission of policy rates into lending rates," it added.

Meanwhile, Singaporean lender DBS Bank said it sees "slightly higher odds" for a pause in the rate cuts at the upcoming review of the monetary policy but added that there will be cuts of 0.50 percent between October to March 2021.

It pointed out that monetary policy committee rejig and a review of the inflation mandate will be the aspects to watch out for, but added that it does not anticipate any change from the current practice of headline consumer price inflation as the main anchor for the monetary policy.

Financial sector health will also be a priority at the monetary policy review, it said, pointing to the grim estimates of a record surge in the stock of dud assets presented by the RBI's financial stability report last week.

National Education Policy: Multiple entry, exits into degree programmes to be allowed

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Students need not stick to the traditional three-year or four-year degree programmes under the National Education Policy(NEP) 2020 approved by the Cabinet headed by Prime Minister Narendra Modi.

Under the NEP, a student can decide whether to complete the full-year programme for entry and exit.

If one year is completed, a student can get a certificate. If the student completes two years, a diploma would be provided. If the three-year or four-year programme is completed, then the degree will be awarded.

A single regulator for higher education will be set up for this purpose.

When can you find the right investment time in the stock market?

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Investing in the stock market can make you earn good amount of money provided you have all the knowledge of the market. You have to understand the insights of the market and then you have to invest in the market according to your budget. If you fail to do so then you would be in a good position to earn a better income. You might also try to make the best income by investing in mutual funds. Regarding your mutual fund investment you need to exactly know how much risk is involved in it. This would help you to determine whether you should invest in the particular stock or you should wait for some more time to research. You would be able to get all the best profit when you try to make a clear decision yourself in the market without making any attempts to get advice from your friends. You would be able to get the right idea by looking at the sensex as well. It is from the stock charts that you would be able to get the right idea where to invest and you also need to look whether you would be in a profitable position in the market by investing in it. You have to know that in the market if you try to take a wrong step then it might make you lose your money and you would be in a mess what to do after losing your cash. You might also consider investing in online stock market but for this you have to try your best to know how to research carefully by visiting genuine sites. There are sites where you would not get any latest updates of the market and so you need to make the right profit. This would also lose your confidence in the stock market where you would not be able to make any profit and would lead you to lose trust in the market as well. Finding the right stocks can also help you to get all the profits without much effort and you would be able to get the right income. You also need to plan the right time when you should invest in the stocks. Therefore you should try your best to understand when can you find the right investment time in the stock market?

 

Know how to invest wisely

You have to try to know how to invest wisely in the market by looking at the conditions of the market. It might be difficult for you to get the best income within a short time but if you lose your hope and patience then it would be much more difficult to get the best income. You have to be informed of the market situation so that you would be able to tackle the risks that would come your way. If you try to invest in the shares and stocks without any attempt to know the past performances then you would not be able to make any good income. If you view the stock market as very risky and you cannot take the risks then you should not try to invest in the market as this would be a big mistake on your part. It would also lead you in making your financial conditions very poor and you would regret for your mistakes.

 

Do try to make the best investment plan

Are you willing to make your investment for short or long term benefits? This question should be answered by you before you try to make your investment in the share market. If you want all your queries to be solved then you should also make good understanding of the market by watching the daily business news. This would help you to make the right type of income and you would find that you have been successful in the stocks. Making your investment in the stocks can help you to gain good money without any problem and you would be glad on your part to get the best profit. Thus you have seen when can you find the right investment time in the stock market.

India's sugar production likely to go up 12% to 30.5 MT in SY2021: ICRA

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The domestic sugar production is likely to go up by 12 per cent to 30.5 million tonnes (MT) during the sugar year 2021, beginning October, due to availability of sugarcane in Maharashtra and Karnataka, according to a report.

The sugar production in India is likely to increase by 12.1 percent to 30.5MT YoY in sugar year (SY) 2021, after adjusting for the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture, ICRA said in a report.

The production is likely to increase in SY2021, because of higher production in Maharashtra and Karnataka, which was adversely impacted in the previous year due to drought.

In addition, heavy rainfall and waterlogging during the last year (August – September 2019) adversely impacted the sugarcane crop in a few regions of Maharashtra and North Karnataka for SY2020, the report said.

ICRA expects the closing stocks for SY2020 at around 11.0 - 11.5MT after considering the consumption of 25MT (decline of 3.8 percent YoY) and exports of 5-5.5MT.

This along with higher sugar production for SY2021 is likely to result in domestic sugar availability of around 42MT.

In the light of the continuing sugar surplus scenario in the domestic market, continued government support would be critical for industry's profitability, it added.

“This increase in production is majorly driven by the increase in cane availability in Maharashtra and Karnataka in SY2021. The domestic sugar consumption was adversely impacted by the nationwide lockdown owing to COVID-19 pandemic due to loss of demand on account either closure or limited operations of several beverage/food manufacturing units during April-May 2020," ICRA Ratings Senior Vice President and Group Head Sabyasachi Majumdar said.

He said, with the easing of lockdown rules, the consumption is back to pre-COVID levels in June-July 2020.

"While we expect a decline in the sugar consumption in SY2020, the same is likely to go back to 26MT levels in SY2021. The closing stocks are expected at around 10.5-11.0MT for the SY2021 season, which is higher when compared to the normative sugar stock levels," he added.

Without considering the impact of the diversion of B-heavy molasses and sugarcane juice for ethanol manufacture in SY2020, the production is expected to be around 32MT, the report stated.

In Maharashtra, production is expected to increase by 64 percent YoY at 10.1MT and in Karnataka, by 26 percent YoY to around 4.3MT in SY2021.

In UP, production is likely to decline by 3 percent YoY to 12.3MT, the report added.

In SY2020, the production was higher by around 0.5-0.6MT than anticipated because the cane which was generally used by the local gur and khandsari manufacturers, got diverted to sugar mills with the former's operations prematurely shut due to the lockdown, it said.

Meanwhile, the report said that the exports were on the lower side during the lockdown period given the modest port operations owing to the logistics issues and labour shortage, but the pace picked up in May-June 2020.

ICRA expects exports of around 5-5.5MT for SY2020.

Assuming the government continues support for exports for SY2021, considering the surplus scenario in the domestic market, exports are likely to be similar to the SY2020 figures, it added.

The sugar prices moderated closer to MSP ( minimum selling price) levels of Rs 31 per kg in March – May during lockdown period and then picked up to Rs 32-32.5 per kg in June.

The pick-up in consumption and pace of sugar exports is likely to support the sugar prices in the near term.

However, given the sugar surplus scenario, any significant increase in the sugar prices is ruled out, the ICRA report added.

Govt plans to auction 5-6 mineral blocks in MP over next 3 months

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The government plans to auction five to six mineral blocks, including iron ore and bauxite mines, in Madhya Pradesh over the next three months, according to an official. Of the 11 blocks that were put on sale by the state recently, there were takers for only five blocks and six mines received no interest from bidders.

"The six blocks had no bidders as they are commercially not viable and do not have very good market value," the official said.

Of these mines likely to be auctioned in the three months' time in Madhya Pradesh, there will be two bauxite blocks, one iron ore and one rock phosphate, he said.

The state saw auction of one mineral block in FY 2016-17, five mines in 2018-19 and two blocks in the last fiscal.

Of the eight blocks auctioned, three are limestone mines, two are graphite, two are diamond and one iron ore block.

Total revenue from the blocks to the government over a period of 50 years is expected at Rs 28,415.60 crore.

The Centre had last month asked each state having mineral resources to identify at least five new mining projects for auction with pre-embedded clearance on a pilot basis with a view to expediting the sale process as well as operationalisation of the blocks.

The mines ministry has released guidelines for the auction of mineral blocks with pre-embedded clearances as it explores ways to address the key issue of delay in mining production due to lack of various approvals such as forest and environment permissions.

The identified blocks would be auctioned along with other blocks without pre-embedded clearances.

Under the guidelines, the Centre has asked states to set up a project monitoring unit (PMU) to complete the preparatory work for obtaining requisite clearances, approvals and related work.

The unit would obtain all the clearances for starting a mining project.

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