Mumbai: State Bank of India is set to sell a large chunk of its education loan portfolio that has turned sour to clean up its retail loan book, which is currently the fastest growing segment.
The lender has invited bids from asset reconstruction companies (ARCs) for an education loan portfolio amounting to Rs 382 crore that was given to 20,891 students. “These are loans which were disbursed many years ago and have turned into non-performing loans (NPAs). We have put them on the block after many attempts to recover the dues turned futile,” said a senior officer from the bank.
The bank has set a reserve price, or a floor price, of Rs 114.6 crore for an all-cash offer. But the reserve price is higher at Rs 152.8 crore in case the ARC makes an offer which is a combination of cash and security receipts, which are similar to bonds payable after 5-7 years. The bank said that in case it is a combination of cash and SR, it would want 50 per cent of the consideration amount in cash.
The outstanding education loan portfolio for all commercial banks is at around Rs 71,700 crore as on the last week of November 2017, as per the latest data released by RBI. The NPA in this segment has risen to 7.3 per cent of the total education loan book for all commercial banks in fiscal 2016-17, as against 5.7 per cent in 2014-15. PSU banks have a large share of education loans after the government stated that PSU banks cannot deny education loans to any deserving student. SBI’s NPA in education loans was estimated atRs 538 crore, followed by Punjab National Bank at Rs 478 crore as on March2017.