India's Education Loan Sector Defies Global Headwinds with Strong Performance
Education lending in India is demonstrating remarkable resilience, maintaining brisk growth and significantly improved asset quality. This positive trend persists even as visa restrictions for Indian students in certain countries and labor-market uncertainties fueled by artificial intelligence cast shadows over employment prospects abroad.
Impressive Growth and Asset Quality Metrics
Data from the Reserve Bank of India reveals a robust 14.8% year-on-year increase in education loans. The outstanding exposure of banks in this segment has now reached an impressive Rs 1.5 lakh crore. Notably, non-performing assets have seen a sharp decline, dropping from 7% of loans in FY21 to approximately 2% in FY25. This improvement is particularly striking given that most large loans in this category are unsecured.
Private Lenders Echo the Positive Trend
Private financial institutions are mirroring this upward trajectory. Amit Gainda, MD and CEO of Avanse Financial Services, highlights that his company manages a loan book nearing Rs 23,000 crore, accounting for almost 10% of the nation's education loan assets. Gainda anticipates growth rates of 20-25%, primarily fueled by escalating demand for overseas education.
"Asset quality in this segment compares favorably with most retail portfolios," Gainda asserts. "At Avanse Financial Services, our gross stage-3 assets, or bad loans, constitute just 0.36% of the book; on a net basis, it is a mere 0.06%."
Factors Driving the Sector's Success
The financing penetration of education expenditure has surged from below 10% to nearly 30%. Gainda attributes part of this success to enhanced collection mechanisms that facilitate easy access and account servicing for borrowers residing abroad. Additionally, lenders have developed sophisticated underwriting capabilities across various educational institutions.
Diversification of Student Destinations
Indian students are increasingly exploring alternative study destinations beyond traditional choices. Emerging popular locations now include:
- Ireland
- France
- New Zealand
- United Arab Emirates
- South Korea
- Japan
- Singapore
- Finland
- Norway
- Denmark
This diversification reflects students' adaptability to changing global dynamics and contributes to the sustained demand driving the education loan sector's growth.
