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India Today
12 hours ago
- Business
- India Today
Degrees on credit: Will students pay for their education in shares?
According to the recently released NEET UG 2025 results, over 12 lakh students have qualified for an MBBS seat in India, and another 11 lakh candidates have cleared the JEE Mains 2025 for engineering. There's high demand for MBAs too, with nearly seven lakh students enroling in postgraduate management courses each what's the cost of these ambitions?A private medical degree can cost up to Rs 1 croreAn engineering degree: Rs 24 lakhA management course: Rs 40 lakhadvertisementOn top of that, Indian students are expected to spend approximately $70 billion annually on overseas education by 2025, with that figure projected to rise to $125 billion by 2030, according to the Indian Student Mobility Report. India's higher education sector has also grown. The All India Survey on Higher Education (AISHE) report of 2021–22 found a jump in student enrolment from 3.42 crore in 2014–15 to 4.33 crore in 2021–22. Private universities, too, are booming. Their numbers climbed from 276 in 2015–16 to 473 in 2021–22, as per the Economic Survey report of 2023–24. But this growth comes with a caveat: cost. A three-year undergraduate degree in Political Science at Ashoka University, for instance, costs 36 lakh. Private universities are booming; their numbers climbed from 276 in 2015–16 to 473 in 2021–22. Credit: Vaani Gupta advertisementTHE LOAN TRAPGone are the days when a parent's savings alone could cover higher education costs. Today, it is found that families take out large loans, they borrow from relatives, or are compelled to sell property in the hope that a prestigious degree for their children would lead to a lucrative career option. According to RBI, the outstanding student education loan amount was pegged at Rs 1.31 lakh crore as of November 2024. A 17% increase over the previous year. The Indian Banks' Association also noted that loan disbursements grew at a 10% CAGR from 2015 to 2023, crossing 25,000 crore repayment is a concern. Education loan NPAs (non-performing assets) stood at 7.61% in FY20, indicating that many borrowers struggle to pay back what they MODELSMany countries are exploring alternative financing models, such as crowdfunded education investment, skills-based repayment plans, equity-based education financing, human Capital Contracts (HCCs), and even Income-Share Agreements (ISAs). This is where students commit a fixed percentage of their future income instead of repaying a traditional loan.'In 2019, a Forbes study revisited Milton Friedman's 1955 idea of Income-Share Agreements,' explains Dr. Girish Jain, Professor of Finance and Chairperson of Admissions at BIMTECH, Greater Noida. He points to Purdue University's 'Back a Boiler' program, which launched in 2016, where one engineering graduate chose an ISA over a conventional loan, agreeing to pay 8% of his salary for 10 years, capped at a reasonable NEP OPPORTUNITYadvertisementDr. Jain believes that for these models to work in India, financial literacy must be embedded in higher education alongside scholarships, boot-camps, and government support. The National Education Policy (NEP) 2020, which targets 50% gross enrolment in higher education by 2035, could become the framework for these financing Inc. could also play a game-changing role. Dr. Jain shares a compelling vision: 'Imagine TCS funds 1,000 tech students each year through income-linked repayment plans. Graduates pay back 5–7% of their salaries for eight years, but only if they're employed. It's not charity—it's a calculated bet on talent. CSR becomes smarter — aligning with ESG goals and workforce needs.'Even HDFC could fund management students, who repay through a portion of their bonuses. Risky? Perhaps. But revolutionary? Definitely.
Time of India
22-04-2025
- Business
- Time of India
Banks approach RBI after being directed to raise risk weights to 150%
Some banks have approached the Reserve Bank of India ( RBI ) after being directed to raise risk weights to 150% on some of their commercial real estate (CRE) exposures against the regular 100%. The observations to raise risk weights on certain CRE accounts were made during the third quarter inspection, said two executives aware of the developments. Risk weights determine the capital that banks have to set aside to cover credit risk; a higher risk weight leads to more capital requirement for a loan. "This issue was discussed in an internal meeting of banks last month, and it was decided to seek clarification from the RBI," said one of the executives, who did not wish to be identified. Some banks have also individually approached the regulator since more capital towards risk weights will impact their lending and they plan to formally raise this issue through the Indian Banks' Association (IBA), he said. As per the RBI's 2009 guidelines, CRE exposures backed by collateral are subject to 100% provisioning, while any unsecured portion is assigned a higher risk weight. "During the annual inspection, banks were told that as per the April 2024 Basel guidelines issued by the banking regulator, risk weights were to be 150% for cases even if the aggregate exposure of the banking system is less than Rs 100 crore for accounts which were rated earlier and subsequently have become unrated," said the executive. Queries emailed to the RBI did not elicit any response till press time.
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Business Standard
21-04-2025
- Business
- Business Standard
RBI directs banks to increase run-off rates for digital deposits
India's central bank on Monday directed lenders to assign a lower-than-proposed buffer rate of 2.5% on digitally linked deposits, with a one-year compliance deadline, marking the latest in its ongoing regulatory easing. The net impact of these measures will improve banks' liquidity coverage ratio as on December-end by around 6 percentage points, the Reserve Bank of India said in a release. All banks would also continue to meet the minimum regulatory LCR requirements "comfortably," the central bank added. The RBI in July proposed that banks set aside an additional 5% 'run-off factor' on digitally accessible retail deposits to better manage risks in case of quick and heavy withdrawals via internet or mobile banking. Lenders can experience "run-off" when individuals and businesses withdraw capital to invest in other higher-paying investments, thereby reducing the bank's total capital. The Indian Banks' Association had urged the RBI to lower run-off to 2% to 3% to avoid a hit to lenders' liquidity, Reuters had reported in August. The norms will be applicable from April 1, 2026, a year later than what was proposed earlier. The RBI also said banks will have to adjust the market value of bonds by applying haircuts, or valuation adjustments, which are in line with those applicable under the central bank's liquidity facilities. Funding from non-financial entities, such as trusts and partnerships, shall attract a lower run-off rate of 40% as against 100% currently, the RBI said. The RBI is "sanguine" that these measures will enhance the liquidity resilience of banks in India and further align the guidelines with the global standards in a "non-disruptive manner," it added.
