Housing Development Finance Corporation (HDFC), educational loan unit Credila Financial Services has set a target of increasing its loan book 2.5 times in the current financial year.
HDFC, early this month acquired an additional 10 per cent with which its stake in Credila increase to 51 per cent, is planning to take control of the distribution network and customer base of HDFC Bank to expand.
Credila Country Head Prashant Bhonsle said: “We have so far disbursed over Rs 40 crore and plan to reach Rs 100 crore by March 2011. HDFC can help us scale up quickly. Along with its brand equity, we can leverage its distribution structure and network”.
The public sector banks (PSBs) are the main players of the education loan. To be in competition with PSBs Credila has to cover a wide distance.
In 2009-10 PSBs disbursed educational loans worth Rs 8,000 crore to 320,000 students while there outstanding loans amounted to Rs 35,628.33 crore at the end of March 2010.
He said, “We can access its (HDFC’s) existing customers and database. It will not only help us expand but also bring down the cost of funds.”
The company is also having talks with other banks in order to diversify its sources of funds. PNB is giving credit whereas CARE has assigned a “BBB”-rating for its term loan facility (Rs 100 crore).
Currently Credila is doing 65 per cent of lending, to students studying within the country and the loan is given mainly for management courses in India, in the United States the disbursement is largely for masters in science, followed by management courses.
Bhonsle said, “This is an asset class in India which has not been focused on as a separate venture. While PSBs have been offering student loan services, they have been selling it as part of the product portfolio they offer.”
Giving details on where does Credila stands out vis-à-vis banks; Bhonsle says the loan facilities offered by banks are mostly identical. Moreover banks sanction loans only after a student has attained admission. Whereas, non-banking financial companies based on domain expertise and their understanding of the background, approve loans before admission.
Credila says that it is more rationalized on courses and career prospects for students, due to which it is more flexible. It gives loans against less security (collateral) as compared to big commercial banks. Bhonsle said, “We are flexible. Our domain expertise helps us extend this facility in such a large market of opportunity.”
It also has a different approach. To get loan student has to visit bank branch whereas Credila reaches out to students for loans.
“Students and parents want the kind of help that we are offering –reaching their door steps. If someone comes to them and explains everything, it makes sense. Small things are of large importance,” added Bhonsle.
Credila’s keep its back-end operations updated on education institutes. It has a database of more than 20,000 colleges.
The company is offering loans between interest rates of 9.75 per cent and 12.5 per cent and provides loans up to Rs 50 lakh, while PSBs do not lend more than Rs 20 lakh.
Thursday, July 22, 2010
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