The Aryavarth Express
Union Minister of State for Finance Pankaj Chaudhary informed the Lok Sabha on Monday that gross non-performing assets (NPAs) in outstanding education loans of public sector banks (PSBs) have declined sharply from 7 per cent in FY 2020–21 to 2 per cent in FY 2024–25, reflecting a significant improvement in asset quality over the years.
In a written reply, the Minister said that credit-related decisions of regulated entities are largely deregulated and governed by board-approved loan policies framed in line with regulatory and statutory requirements, as well as the terms of loan agreements between borrowers and lenders. He added that the Reserve Bank of India (RBI) has advised banks to follow such board-approved policies while making credit decisions, in accordance with regulatory guidelines.
Chaudhary noted that the RBI has undertaken several measures to strengthen recovery and address stressed assets, including the issuance of the Prudential Framework for Resolution of Stressed Assets under RBI (Commercial Banks – Resolution of Stressed Assets) Directions, 2025. The framework provides a principle-based, time-bound approach for early recognition and resolution of defaults.
He further stated that all scheduled commercial banks have been advised to adopt the Model Education Loan Scheme (MELS), which offers need-based education loans without collateral security or third-party guarantees for amounts up to ₹7.50 lakh, provided borrowers are eligible under the Central Sector Interest Subsidy Scheme (CSIS) or the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).
Public sector banks also extend collateral-free education loans beyond ₹7.50 lakh on a case-by-case basis, in line with their respective board-approved policies, the Minister said.
Highlighting the PM Vidyalaxmi scheme, Chaudhary said it aims to ensure that financial constraints do not hinder meritorious students from pursuing higher education. The scheme enables eligible students admitted to top-quality higher educational institutions to access collateral-free and guarantor-free education loans through a simple, transparent and student-friendly application process.
