PM Vidyalaxmi: Significant relief in education loans, the PM Vidyalaxmi scheme is proving to be a game-changer..

There has always been a concern that education loans might become a burden in the future. However, government data is now telling a different story. According to the Reserve Bank of India (RBI), the gross Non-Performing Assets (NPAs) in education loans of public sector banks have decreased significantly in the last few years.

While this figure was around 7% in the financial year 2020-21, it has dropped to just 2% in 2024-25. This directly means that the recovery of education loans has improved, and the banking system has become stronger.

Relief for both students and banks

The benefit of reduced NPAs is not limited to banks alone. The biggest beneficiaries are the students and their families. When defaults on education loans decrease, banks lend with greater confidence. This makes it easier to secure financing for education. This change is considered particularly important for students from middle-class and lower-income families.

RBI policies played a major role
The RBI has already given clear instructions to banks that each bank must have its own board-approved loan policy. Credit-related decisions are taken under that policy. In addition, the RBI implemented a new prudential framework in 2025 for the timely identification and resolution of stressed assets. This framework aims to resolve any loan-related problems quickly, rather than letting them drag on.

Education loans without collateral
A major concern regarding education loans has always been the requirement of collateral and security. Under the RBI's model education loan scheme, no collateral or third-party guarantee is required for loans up to Rs 7.50 lakh. The only condition is that the student must be eligible for the relevant government subsidy or guarantee scheme. This has provided relief to millions of students, especially those from families who do not have assets to pledge as collateral.

Loans above Rs 7.50 lakh are also available without collateral

Very few people know that public sector banks can also provide education loans exceeding Rs 7.50 lakh without collateral. This is entirely on a case-by-case basis and depends on the bank's board-approved policy. If the student has a good academic record and the course and institution are considered strong, banks may show greater confidence.

Strength from old regulations
The RBI's 2010 circular is still considered important in the case of education loans. According to this, banks are not required to mandatorily demand collateral for education loans up to Rs. 4 lakh. This rule has proven particularly beneficial for students from smaller cities and towns.

New hope from the PM Vidyalaxmi Scheme
The PM Vidyalaxmi Scheme, launched in November 2024, is being seen as a game-changer in education finance. This scheme aims to ensure that meritorious students studying in the country's top-quality higher educational institutions do not have to drop out due to a lack of funds. Under this scheme, completely collateral-free and guarantor-free loans are available through a simple and student-friendly process.

Improved recovery increases confidence in the system
The biggest indicator of the decline in NPAs in education loans is that students are now understanding their responsibility and are serious about repaying the loan after completing their studies. Banks have also made their recovery systems more professional and sensitive. As a result, education loans are now becoming a reliable investment for banks, rather than a risk.

Government's clear message
In a written reply given in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary clearly stated that the government wants no student to drop out of their studies simply because of financial constraints. Better policies, easier loans, and a robust recovery system are all part of this vision.

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