education loans revised- july 2014. introduction –education scenario in india, latest trends, why...

Education Loans

Revised- July 2014

• Introduction– Education Scenario in INDIA, Latest trends, Why Education loans

• Customer Insights – Potential of Education Loans, Current Players, Target Group-

examples, Customer Profiles

• Customer Offerings– What are the various products in offerings

• Processes– Documentation required, Application Procedure, Tranche

Disbursements

• Customer FAQ's– Most commonly asked questions

• Application Form – Sample of filled Application Form

Introduction

Education in India

• 1027 million population and 350 million illiterates• 87% dropout by 12thstd• Literacy rate of 65% which is on the rise.• Lack of proper public education systems prompts 27% of the

population to go for Pvt. education.• Cost of Pvt. school education has increased from Rs.25000 to

Rs.65000 per annum• There is a silver lining to the whole scenario with lot of initiatives

from the Govt. and World Bank aided projects ……………

Education in India• Government Programs include

– Sarva Shikhsha Abhiyan–Universalize Elementary Education– Operation Blackboard –Provide minimum Infrastructure– District Primary Education Programme– Primary Education & Secondary Education

No assistance to higher education !!!

Scenario of Higher Education• Growth and Types of Institutions

30% enrolled in fully private

institutions

Public funded institutions have not

increased in past five years

42% of institutes in India are

privately funded and run

Higher Fees

Name of the Institute

Present Fees for PGP2007 – 2009 (Rs.)

Proposed Fees for PGP2008 – 2010 (Rs.)

I - Year II – Year Total I - Year II -Year Total

IIM Ahmedabad

200000 230000 430000 550000 600000 1150000

IIM Bangalore 250000 250000 500000 400000 500000 900000

IIM Calcutta 201400 198600 400000 300000 400000 700000

IIM Lucknow 194500 209500 404000 250000 250000 500000

IIM Indore 190000 200000 390000 300000 310000 610000

IIM Kozhikode 190000 210000 400000 300000 300000 600000

Source: Ministry of Human Resource Development, April 21,2008

Higher FeesName of the Institute City Total Fees

(2008-09) Future

IILM Institute for Higher Education Gurgaon 1080000 ?????ICFAI Business School Hyderabad 950000 ?????Indian Institute of Health Management Research Jaipur 680000 ?????

T A Pai Management Institute Manipal 646000 ?????Deepshikha College of Technical Education Jaipur 600000 ?????Institute of Finance & International Management Bangalore 600000 ?????

Fore School of Management New Delhi 600000 ?????Foundation for Organizational Research & Education – School of Management New Delhi 600000 ?????

Asia Pacific Institute of Management New Delhi 590000 ?????Centre Of Management Development Ghaziabad 580000 ?????

Latest Trends

• Student educational loan is NOT a focus area for most of the banks

• Complex paper work required to process the student educational loan

• Almost 81%of the students interviewed said “Yes” to their opting for Education Loan

• Lack of funds for higher studies is a huge deterrent

Why Education Loans?• No specialized financial institutions catering to education loan market in

India

• Education loan volumes are growing at 35-40%per annum driven by:– High priority on education in the Indian culture– Privatization of post-secondary education– Emergence of private high-end educational institutions– Rising costs of education– Introduction of online system for processing loan applications within

stipulated time and conveying sanction to the student

• Market for Education Loans in India is constantly expanding:– GDP Growth >6% pa is creating millions of new jobs for educated

youth– Extremely high rate in enrollment of students for higher education

• Millions of aspiring students who can’t find funding for their education due to bureaucratic approach of traditional banks

Customer Insights

Potential of Education Loans• Potential in Indian Market for Education Loan

• Undergraduate and graduate education -Private Financing• Opened up the higher education sector to private educational

institutions

100 million

219 million

20 – 29 yrs

10 – 19 yrsTarget segment of education loans

No Government Subsidy

High Cost of Education

Huge demand of education loans

Why Now?

Compelled to explore

loan options

Up front Expenses

Sharp rise in fees of IIMs

Open minded to seek

guidance

Opportunity Available

Huge Opportunity

India higher

education

market

Great need for

skilled

manpower

Huge population

of students

going aboard

Average course

fees of $20,000

Education loan

focus on Indian

colleges

Current Market Players

Bank Current Year (2008-09)

Last Year (2007-08) % growth

State Bank of India Rs 6600 crores

Rs 4400 crores 50%

Indian Bank Rs 1850 crores

Rs 1149 crores 61%

Andhra Bank Rs 1800 crores

Rs 1167 crores 54.24%

Bank of Baroda Rs 1000 crores

Rs 753 crores 32.67%

Bank of India Rs 1000 crores

Rs 720 crores 38.9%

UCO Bank Rs 333 crores

Rs 225 crores 48%

Union Bank Of India Rs 80 crores Rs 55 crores 45%

Education Loan Market

Existing Market systems•Catered by PSU Banks•Inbound/model pull•Cross selling to existing

customers•Long Processing & low

approvals

Credit & Operational Risks•Lack of domain expertise•Tracking & repayment

complexities

Growth Potential•Changing Demographics•Industrial resurgence•Deeper penetration of fin

services•Service economy growth

Regulatory Scenario

Priority Sector

Pricing for banks regulated

SWOT for Tata Capital Financial Services Ltd

Strengths

Based on “Trust”

Tata Eco System

Service Delivery

Weakness

Late entry into the market

Cost of funds

Not top of mind

recall

Opportunities

Recession proof income

Growing Demand &

supply gap

Only NBFC to offer

Education Loan

Threat

Highly Competitive

Market

Aggressive marketing by

PSBs

Our Value Proposition

“TCFSL helps you realize your/your child’s dreams of

future studies, in India and Overseas by providing

access, finance and convenience.”

Target Group -Examples• Post-Graduate Courses: Ms. Rekha hails from a

middle class salaried family. With a single earning parent, the high fees of the institute would have made her dream education distant without availing education loans. For such students, education loans bridge the financial gap to pursue their dream courses.

• Going Abroad: Mr. Ganesan had secured admission at Purdue University. His parents kept their house in Chennai as collateral to ensure that their son’s dream of higher education abroad is met

Target Group -Examples

• Part-time courses: Mr. Sunil wanted to pursue post-graduation after his college but could not. After working for 2 years in an MNC, he felt the need to do part time post graduation course to increase his skill sets

• Vocational courses: Ms. Reshma wanted to be an airhostess. With the growing demand of such vocational courses, the financial needs of the programme can strain the finances of the family. The education loan would help balance her aspirations and reality

Education LoansCustomer Profile• Student

– Indian Nationality– Secured admissions in recognized courses/ Institutions/

Universities through a selection process / entrance test.– Age (18 years – 35 years)– 60% in last qualifying examination

• Parent– Salaried (Public Ltd Companies, Multi National Companies,

Govt./Public Sector Undertakings, Educational Institutions, Hospitals, Financial Institutions, Insurance Companies, Banks, International Non Profit organizations, recognized Private Ltd Companies etc…)

– Self employed Professionals (Doctors, CA, Architects, Engineers, Cost Accountants, Consultants etc…)

– Self Employed Business (Retailers, Wholesalers, Entrepreneurs, Manufacturers, Proprietors, Partners or Directors of Pvt. ltd. companies)

– Age for Salaried Parent (23 years – 58 years) / Age for SENP or SEP Parents (23 years – 65 years)

Customer Offerings

Education LoansEligible Courses• Studies in India

– Post graduation (Masters, PhD, MCA, MBA, MS)– Professional courses (Engineering, Medical, Architecture,

Veterinary, Law, Management, Computer Science etc.)– Vocational Courses.– Courses by IIMs, IITs, IISc, XLRI, NIFT, reputed universities &

institutes etc.

• Studies Abroad– Courses conducted by CIMA – London , CPA - USA etc.– Undergraduate Courses in aboard.– Vocational Courses.– Courses admitted through GRE, GMAT, SAT, TOEFL exams.

ONLY ONE COURSE WOULD BE FINANCED AT A TIME !

Education LoansTenorA) Studies in India :-• Min 12 months & Max 5 years from the expiry of the moratorium

period.B) Studies Abroad :-• Min 12 months & Max 3 years from the expiry of the moratorium

period.

Moratorium• Interest to be serviced during this period• Shall not exceed course duration + 6 months

Collateral RequirementLoan Amount Collateral

< 7.5 lakhs Not Required

> 7.5 lakhs

Upto 120% of loan amount and Third Party Guarantee for 100% of loan amount

Education Loans

Loan Amount

Margin Requirement

Studies In India Rs 75,000/- – Rs 15,00,000/-

Studies Aboard Rs 5,00,000/- – Rs 20,00,000/-

Up to 500000 No Margin

More than 500000 Studies in India 20%Studies Aboard 30%

Education Loans

Features •Favoring the institute•Tranche Disbursement

Requirement•Satisfactory Performance required

Remedial•Option to discontinue loans

Disbursement

Education Loans• Mode of Repayment• Flexible Modes of Repayment

– Electronic Clearing Services (ECS) / Electronic Fund Transfer (EFT)

– Post Dated Cheques (PDCs)– Deduction against salary

• No prepayment/foreclosure penalty to be charged

Secured Education Loans

Residential

Property

Commercial

Property

Govt.

Securities

Public Sector

Bonds

NSC/ KVP/LIC

Policies

Shares/

Debentures

Bank Deposits

Education Loans - Pricing

RAAC Rates

Category Loan Type Indian Studies

Studies Aboard

Processing Fees

Open Market

Secured 12.50% 12.50% 2.00%

Un Secured 14.50% 14.50% 2.00%

TATA Employees(Applicants/Co-applicants)

Secured 11.95% 11.95% 1.00%

Un Secured 13.95% 13.95% 1.00%

Education Loans – Unique Features• Attractive Interest Rates

• Higher limits of unsecured lending

• Principal Holiday Period– 6 months post course completion– Interests needs to be paid

• Disbursement– Direct disbursement– Avoid misuse of Loan

Loan Amount Security< Rs 7.5 lakhs No security> Rs 7.5 lakhs 120% of the loan amount

Education Loans – Unique Features• Tranche Disbursement

– As & when you require– Interest only on amount disbursed

• Flexible Repayment Options– Electronic clearing services (ECS) / Electronic fund transfer

(EFT)– Post date cheques (PDCs)– Deduction against salary

• Credit Shield– Borrower are insured during the loan tenure

• Flexible Collateral Option

• Avail Tax Exemption• Interest rate charged till moratorium• Fixed rate of interest• Easy release of collateral• Quick & Efficient disbursement• Easier Documentation• No hidden costs• Covers tuition fees, travel expenses, passage money, books,

equipments etc….

Education Loans – Unique Features

Examples

Processes

Documentation required

• Applicant– Mark sheet of the last qualifying exam– Admission letter/ Fee receipt– Schedule of expense of course– Copies of letter confirming scholarship/free ship/studentship if any

Documents Salaried Self-Employed Professional

Self Employed Businessman

Proof of income

• Pay slips for the last 2 months• Latest Form 16• Bank Statement for last 6 months

• ITR for most recent 2 years• Tax assessment order• Audited B/S &P&L• Bank statement for last 6 months

• ITR for most recent 2 years• Tax assessment order• Audited B/S &P&L• Bank statement for last 6 months

Proof of Employment

• Appointment letter• Increment / Promotion letter• Pay Slip• Form 16• ID card

• Qualification Certificate• Certificate of passing• Registration with respective association

• ITR / Assessment order• Bank certification report• Import/ Export code from RBI

Documentation required ….contd.

Documents Applicant Salaried Self-Employed

ProfessionalSelf Employed Businessman

Proof of Age

• School Leaving Certificate• Passport • Pan Card• Birth

Certificate• Life Insurance

Policy• Driving

License

• School Leaving Certificate• Passport • Pan Card• Birth Certificate• Life Insurance

Policy• Driving License

• School Leaving Certificate• Passport • Pan Card• Birth Certificate• Life Insurance

Policy• Driving License

• School Leaving Certificate• Passport • Pan Card• Birth

Certificate• Life Insurance

Policy• Driving

License

Signature Verification

• Passport• PAN Card• Driving license• Signature

verification from bank

• Armed Forces ID Card• Passport• PAN Card• Driving license• Signature


• Armed Forces ID Card• ID issued by

central/state govt.• Passport• PAN Card• Driving license• Signature


• Armed Forces ID Card• ID issued by

central/state govt.• Passport• PAN Card• Driving license• Signature



Documents Salaried Self-Employed Professional

Self Employed Businessman

Residence Address Proof

• Telephone bill• Electricity bill• Water bill• Ration card• Electoral ID card• Pass book copy

with declared address







• Business continuity / operation proof– ITR– Sales Tax Returns– Registered Lease Deed on stamp paper

• Repayment Track Record• Loan Agreement

Salient Features• Avail tax exemption*• Moratorium up to 6 months beyond course completion• Interest payment during moratorium• Higher limits of unsecured lending• Fixed rate of interest during the tenure• Direct disbursement to educational institute• Quick documentation• Flexible repayment options• Covers tuition fees, project work, travel expenses etc…• No prepayment/ foreclosure charges• Multiple collateral options• Tranche disbursement• Credit shield available• Prompt release of collateral• No hidden costs

Application Procedure

Tranche Disbursement

Points to Pitch

Points to Pitch

House of TATA’s

Higher limits of

unsecured lending

Flexible tenure

options

Quick & efficient

disbursement

Direct Disbursement

Points to Pitch ….contd.

Points to Pitch

Availability of ECS

Better Service

Delivery

Easy

documentationCredit Shield

Interest on amount

disbursed


Points to Pitch

Availability of ECS

Better Service

Delivery

Easy documentationCredit Shield

Interest on amount

disbursed


Points to Pitch

Easy release of

collateral

No hidden costs

Multiple

collaterals

24X7 customer

support

Customer FAQs

Frequently Asked Questions

• What are the interest rates?• What are documents required?• Why should I take a loan from education loan from Tata Capital

Financial Services Ltd ?• Is their any age criteria for education loans?• What are the modes of repayment?• How long is the moratorium?• What is the tenure of the loan?• Are there any pre-payment charges?• What is an EMI? How is it calculated?• Who is a co-applicant?

Thank You