There are concerns that loans amounting to Rs 300 crore provided by more than 30 banks under the Bihar Student Credit Card (BSSC) scheme, promoted by the Bihar government, might turn into non-performing assets (NPAs).
What is this scheme: Bihar Student Credit Card (BSSC) scheme?
The BSSC scheme was launched in October 2016 with the aim of offering financial support to students pursuing higher education. Under this scheme, students can obtain loans up to a maximum of Rs 4 lakh. The interest rate for these loans has been 4% since 2018, while it was 10% before that. Girls, disabled individuals, and transgender individuals are eligible for a 1% interest rate. The state government serves as the guarantor for these loans.
Loans sanctioned under this scheme
Chief Minister Nitish Kumar has praised the scheme on multiple occasions as it has helped students from backward classes and Scheduled Castes (SCs) gain access to higher education.
To date, loans totaling Rs 3,500 crore have been disbursed under the BSSC scheme. In the academic years 2017-18, 2018-19, and 2019-20, student credit cards were issued to 37,308, 26,796, and 23,405 students respectively. From 2019-20 onwards, the Bihar State Education Finance Corporation Limited has taken charge of implementing the BSSC scheme. In 2020-21, credit cards for loans worth Rs 2,041 crore were issued to 1,36,217 students. The state government has set a target of issuing at least one lakh credit cards annually.
According to the scheme’s guidelines, the loans must be repaid within six months of a student securing employment or one year after completing the course, whichever comes first.
Loan turned NPA
Shiv Prakash Jha, from the State Level Bankers Committee (SLBC) in Bihar, has informed The Indian Express that a list of non-performing student credit card loans has been submitted to the government.
An SLBC source mentioned, “We have completed all the necessary banking procedures for loan recovery, including serving legal notices to the students and their guardians. The amount of bad loans is estimated to be around Rs 300 crore, and it is increasing… The trend of non-performing assets is highly discouraging.” Regarding the reasons behind the increase in NPAs, a senior official working on the BSSC scheme stated, “Since the interest rates were significantly higher at 10% until 2018, most of the loan defaults could be from that period. Moreover, with the state government serving as the guarantor for the loans, many students and their guardians might not be taking the loans seriously.”
The official, who preferred to remain anonymous, mentioned that the loans started turning into NPAs in 2021. “There has been some verbal communication between banks and the government, but there is a specific process for banks to raise concerns about NPAs and a timeline for the state government to assume responsibility for loans that have become non-performing,” the official stated.
Sanjay Ghose, the nodal officer for monitoring the BSSC scheme at the State Project Management Unit, stated that they have been receiving several complaints from students who have received loan recovery notices. “Some students have also approached the Chief Minister’s public hearing (Janata Darbar) demanding a change in the interest rate from 10% to 4% for loans issued during the initial period,” he added. Authorities have not yet received a comprehensive list of the non-performing loans, according to Ghose.