Edu advances hold up well despite visa, AI headwinds

Mumbai: Education lending in India is proving unexpectedly resilient. Growth remains brisk and asset quality has improved even as visa curbs for Indian students in some countries and labour-market uncertainty from artificial intelligence cloud employment prospects abroad.

Data from Reserve Bank of India show education loans rising 14.8% year-on-year, with banks' outstanding exposure reaching Rs 1.5 lakh crore. Non-performing assets in the segment have fallen sharply, from 7% of loans in FY21 to about 2% in FY25, despite most large loans in this segment being unsecured.

Private lenders echo the trend. According to Amit Gainda, MD and CEO of Avanse Financial Services, the company has a loan book of close to Rs 23,000 crore and accounts for nearly 10% of the country's education loan assets, which he expects to grow at 20-25%, driven chiefly by demand for overseas study. Asset quality, he argues, compares favourably with most retail portfolios.

"At Avanse Financial Services, our gross stage-3 assets (bad loans) account for just 0.36% of the book; on a net basis, it is 0.06%. Financing penetration of education spend, once below 10%, now approaches 30%.

"Part of the reason for this is improved collection mechanisms that enable borrowers abroad to access and service their accounts easily, along with underwriting capabilities lenders have built across educational institutions."

Students are also diversifying their destinations. Emerging choices include Ireland, France, New Zealand, the UAE, South Korea, Japan, Singapore, Finland, Norway and Denmark.