Study Of Effectiveness And Evaluation Of Indian Banks’ Strategies Regarding Student Financing

(A case study of State Bank of India)

Short Synopsis

For

Ph. D. Programme 2009-10

DEPARTMENT OF MANAGEMENT

FACULTY OF MANAGEMENT SCIENCE

Submitted by:

Name: Aarti Dewan

Registration No.: 09029990081

Registration Date: 18/2/2010

Supervisor:

Name: Dr Priyanka Srivastva

Sign:Designation: Professor

Department: FMSDepartment MRIU, Faridabad

DECLARATION

I hereby declare that the PhD Research Scholar entitled topic “Study of Evaluation of Banks’ Strategies regarding Student Financing (a case study of State Bank of India)” is my own work and endeavor and has been compiled by me under the supervision of my guide Dr.Priyanka Srivastva.

This research proposal has not been previously submitted for the award of any degree, diploma, associate-ship, fellowship or its equivalent to any other University or Institution. When other sources of information have been used, they have been acknowledged. Hence, it may kindly be accepted by DRC as per the requirement.

Signature of research scholar

Name: Aarti Dewan

Registration No.: 09029990081

Batch: 2009-2010

Department: Faculty of management

CERTIFICATE

This is to certify that entire text of this synopsis preferred by research scholar, has been read thoroughly & it is as per guidelines & grammatically corrects & free from plagiarism. This has been prepared under the guidance & supervision of my supervisor.

Certified that the synopsis “Study of Effectiveness and Evaluation of Indian Banks Strategies regarding Student Financing” (A critical case study of State Bank of India)” is the record of bonafide work carried out by Ms. Aarti Dewan under my supervision. The research proposal is worth submitting for the degree of Doctor of Philosophy in Management under the Faculty of Management Science.

Signature of Supervisor

Name: Dr Priyanka Srivastva

Designation: Professor

Department: FMSDepartment MRIU, Faridabad

RECOMMENDATIONS

I recommend this short synopsis is prepared and submitted by Ms Aarti Dewan for approval of Ph D Quality Enforcement committee and therein to be uploaded on Shodh Gangotari.

Dr Chhavi Sharma

Director & Dean FMS, MRIU

ABSTRACT

The study proposes to assess the reasons and factors related to education loan strategies given by Indian Banks and also examine the students’ expectations with respect to different aspects of student loan. Further the study also proposes to evaluate the strategies for these banks for raising students’ confidence towards Student Financing Schemes. The research design of the study is descriptive. The study intends to make use of information collected from secondary data sources. Research is two tier studies and seeks to explore the responses from both the student and Bank’s Official i.e. for students to know reasons and problems faced by them and from Bank Officials to know their opinion towards education loan. The data collected from sources like bank’s website was further put to analyze by using statistical techniques .Education not only impacts the human development and economic growth, but is the fundamental requirement of democracy. Through education, people become more responsible and informed citizens, and can voice their concerns and issues in political system of their society. It is an essential element for democracy and eradicating poverty. It also helps people in improving productivity, thus playing greater roles in economic life and earning a better livelihood for themselves and the society.Student loans undeniably have varied advantages, but in many cases, the borrowers may end up being caught in a bigger trap than what they had imagined. With the mounting fee structure of educational institutions it has become really difficult for students, belonging to average pool of society, to enroll themselves for higher studies due to cash crunch.

Key words

Student Financing, Student Perception, Value Addition, Mortgage, Procedure, Disbursement etc

Contents

S.No.DescriptionPage No

  1. Introduction1
  1. Literature Review 9
  1. Objectives14
  1. Work Plan & Research Methodology15
  1. Significance of the Study16
  1. References17

Introduction :

Education is the process of instruction aimed at the all round development of individuals, providing with necessary tools to participate in day to day activities of the world. It dispels ignorance and boosts moral values in the individuals. It forms the basis for lifelong learning and inspires confidence to face challenges; besides providing skills to become more self reliant and increases awareness. Education not only impacts the human development and economic growth, but is the fundamental requirement of democracy. Through education, people become more responsible and informed citizens, and can voice their concerns and issues in political system of their society. It is an essential element for democracy and eradicating poverty. It also helps people in improving productivity, thus playing greater roles in economic life and earning a better livelihood for themselves and the society. Therefore, education is the key, which allows people to move up in the world, seek better jobs and ultimately succeed in their life. In India, getting education has been a big problem since long. A small minority in the elite class get access to excellent education facilities; whereas the poor practically get no education at all. One main reason for inadequate access to education in India is the high cost of education and lack of access to funding higher education.

Education is what helps an individual to rise higher in life; the word education itself has been derived from a Latin word “ed-u-care” which means “to rise”. Over years, right from the mahatma’s and The Guru’s, what has remained common is the important of knowledge and skills to others. However unlike that era, education is no longer free. Eklavaya had to give up his thumb as “ Guru Dakshina” but in over days we need not bestow “ Guru Dakshina” as Education now comes in exchange of money, today we can buy education for self and children whether or not we have enough funds to spend on the desired education and that is where “Education Loan” comes into picture.

Any parent would worry about their child’s educational needs. Most of the parents by now know the heavy education expenses; whether it is a private high school, college, university, or overseas education, the costs just keep on adding up. An education loan is just like a debt. The money that you borrow from the bank and repay it with interest. The importance and value of education is known to all of us. It is the actual wealth of a person. However, at times, we encounter the situation where there is willingness to study more and get higher degrees, but due to our limited financial sources it gets bit difficult. It is under this situation education loans prove as a boon.

India is Promised Land of scholars and saint. There has been no dearth of knowledge in India, since Time immemorial. Indian civilization has been blessed with priceless knowledge of Vedas and Purans. Coming all along with these Holy Scriptures, till the modern age of Science and Technology, India can be found nowhere legging behind. Nevertheless we need not deny the fact that, India still possesses some quarters, where a bud of education is still to sprout. As India, witness tremendous upheavals in Indian economy- a segment ascending, while another suffers heavy descend- Education System is also building similar pandemonium. Every year India produces thousands of brilliant assets from IITs, IISCS, AIMS, BITS and ISB, who glows inn very sphere of modern world concurrently, India still owns people in large numbers who are debarred of the basic education. Hence, in spite of its triumph in major areas, Indian education system is tainted with a few blemishes.

At the down of modern India, she has received privileged initiatives by scholars like Raja Ram Mohan Roy, Dayanand saraswati to spread education to many quarters of Indian Population-big or small. British Govt. also took measures in spreading education among Indian masses by establishing various schools and colleges. No doubt, this was a part of their ruling policy but has been one of the promising act to which India will always comply with. After Independence state Govts. Held responsibility for education, where upon in 1976, the state and centre took jointly responsibility.

Tradionally in India, public enterprise has been the primary sporter of educational institutes with state govt. bearing almost 80-90% financial burden and central Govt. accounting for the rest According to recent estimate, Indian students (or their parents) have spent almost $1.1billion for getting undergraduate and business degree abroad (not including graduate and advanced degree students who mostly get scholarship from the foreign university) while Govt. laws and mandated did not allow even a tiny fraction of that money to be injected into Indian public Universities in the form of endowment or tuition fees . Therefore, Govt.policies and legal mandates need a major reformation.

ABOUT STATE BANK OF INDIA:

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480 offices comprising branches, sub offices and three Local Head Offices, inherited from the Imperial Bank. Instead of serving as mere repositories of the community's savings and lending to creditworthy parties, the State Bank of India catered to the needs of the customers, by banking purposefully. The bank served the heterogeneous financial needs of the planned

Economic development.

A term loan granted to Indian Nationals for pursuing higher education in India or abroad where admission has been secured. All courses having employment prospects are eligible. Student loans are the main method of direct government support for students in higher education. Money is loaned to students at a subsidized rate to help towards their maintenance costs and to cover the cost of tuition fees. Graduates repay these loans to the government after their income exceeds the threshold level. These loans are therefore a method for private contributions towards the costs of higher education. An aim of the student support system is to ensure that the upfront costs do not deter potential students. Graduates repay student loans and they generally have above average incomes. The current system has been criticized on a number of different grounds including not covering living costs, excluding part-time students, being too expensive, targeting its interest rate subsidy at higher earning graduates and putting off potential students who are concerned about graduating with large debts.

The boom in the banking sector has led to release of large amount of funds for education loans. Now, education loans are easily available from various banks in India and this change is encouraging more and more students to take up higher education despite their financial shortcomings. Many nationalized as well as private banks have come up with various educational loan schemes that students can benefit from.

State Bank of India (SBI) is India's largest bank by profits, assets, deposits, branches and employees - a position it is holding for two centuries now. The government of India controls the bank through the majority stake (nearly 60% as on March 31, 2007) held in it by Reserve Bank of India. The central bank is in the process of transferring this stake to the direct control of the government of India.

SBI has a hoary past, starting two centuries ago in Kolkata as Bank of Calcutta on June 2, 1806. Since then it has undergone various transformations. It was re-named Bank of Bengal in 1809. Bank of Bengal was merged with Bank of Bombay and Bank of Madras in 1921 to form Imperial Bank of India. This was converted into the present State Bank of India in 1955 through a special Act of the government of India in 1955. In 1959, SBI took over eight banks which were formerly associated with states of pre-independence India. These banks - State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra and State Bank of Travancore - later came to be known as Associate banks of SBI.

At the time of India's independence in 1947, SBI (then Imperial Bank) had a capital base of Rs. 11.85 crore, deposits and advances of Rs.275.14 crore and Rs.72.94 crore respectively and a network of 172 branches.

The State Bank of India, popularly known as SBI, is one of the leading banks in India. The bank traces its origin to the first decade of the 19th century. Later on, it was merged with the Imperial Bank. In the year 1955, the Government of India nationalized the Imperial Bank along with the Reserve Bank of India. Ever since that time, the bank acquired its present name that is SBI. The State Bank of India is India's largest commercial bank. The bank has been striving sincerely to adhere to the efforts of providing utmost customer satisfaction to the best possible extent. The Bank is actively involved since 1973 in non-profit activity called Community Services Banking. All the branches and administrative offices throughout the country sponsor and participate in large number of welfare activities and social causes. Their commitment to nation-building is complete & comprehensive.

In terms of profits, assets, deposits, branches and employees, State Bank of India are the country’s largest commercial Bank. It strives to continuously provide latest and up to date information on its financial performance. It is their endeavor to walk on the path of transparency and allow complete access to all the stakeholders enabling total awareness about the Bank. Including that SBI is one of the largest lending Bank of India besides other loans in association with IBA, SBI launches SBI Student loan Schemes:

SBI Student loan Schemes: This scheme was recommended by R.J. Kamath Committee. To extend the need based financial assistance to deserving/meritorious students for pursuing higher education in India and abroad with relaxations in security and margin. It is a model scheme prepared by IBA as advised by RBI and in pursuance of instructions of Ministry of Finance.

  • SBI Education plus Schemes: This scheme was targeted at employed persons who pursue Distance Education Courses and Part time Courses. It is a personal Loan scheme.
  • Education loan Scheme for NRI: RBI has conferred a non-resident status to Indian Students abroad under FEMA. Hence they are now eligible for the facilities just like any NRI.
  • New Insurance Schemes for Education loan: In this Policy the repayment of an Education Loan will be made under the policy in the event of death of the borrower(s). It will be marketed as an Individual product and a policy document with SBI designated as the assignee will be issued to each borrower individually.
  • SBI Scholar: In this scheme Loans will be granted to deserving/meritorious students for pursing full time courses in India at approved premier and reputed institutes.
  • Special Education loan package for ISB: A special package of the Education Loan scheme is being offered to students of Indian school of Business (ISB), Hyderabad wherein a loan offered with fixed interest.
  • Education tie-up with APTECH: It is a personal loan product. Can be sanctioned to an earning parent to a student or earning student to take-up a computer course.
  • SBI Education Plus: This scheme isOnly for Career Enhancement Purpose for Employed people pursuing Distance Education. This loan product is in the form of personal loans and is different from Education Loan Scheme.

OVERVIEW OF

STUDENT FINANCING:

Student financing is meant for the needy students whose financial background is weak. Student financing available in the following form:

  • Higher Education Loan
  • Scholar Loan
  • Career Loan for employed person.
  • Loan for Self-Employment

Finance is required for further studies ( for graduations, Post graduations, PhD). Till some year’s back higher education and quality education was not affordable to some illustrious students because of the financial constraints. There was no any alternative but to leave the studies incomplete or to jump in the job market prematurely and unwillingly. And this led to untimely end of budding talents and their forceful transformation into to the mediocrity. Although scholarships were there, but those were so less in numbers that only luckier few could avail them. But now the things are different with lots of Student Loan Options and Student Loan Schemes being offered by various Banks and Institutions.

The boom in the banking sector has led to release of large amount of funds for education loans and loans for self employment. Now, education loans are easily available from various banks in India and this change is encouraging more and more students to take up higher education and to begin their own careers despite their financial shortcomings. Banks have adopted various schemes to facilitate the growth of the education loan portfolio and to set up new ventures in different fields. Apart from tying up with several institutes and offering interest rate discounts, they also accord online sanctions and ensure speedy disbursal of the loan.