**Executive Summary**
This document is the answer from the Minister of State in the Ministry of Finance to Unstarred Question No. 2529 in Lok Sabha, dated December 15, 2025, regarding Non-Performing Assets (NPAs) of Public Sector Banks (PSBs) related to education loans. It provides data on the improvement of NPA ratios and RBI initiatives taken to improve recovery and resolve stressed assets, including directions to adopt the Model Education Loan Scheme (MELS). There are no explicit deadlines mentioned.
**Key Points / Main Content**
* **NPA Status:**
* Gross NPAs of PSBs related to education loans have decreased from 7% in FY 2020-21 to 2% in FY 2024-25.
* RBI does not maintain state-wise statistics on education loan NPAs.
* **RBI Regulations and Guidelines:**
* Credit-related matters are largely deregulated and governed by Board-approved loan policies of Regulated Entities (REs).
* RBI has advised banks to implement Board-approved loan policies.
* RBI has issued the Prudential Framework for Resolution of Stressed Assets.
* **Model Education Loan Scheme (MELS):**
* RBI has advised all Scheduled Commercial Banks (SCBs) to adopt MELS (last amended on 21.3.2024).
* MELS provides need-based education loans without collateral security or third-party guarantee for loans up to ₹7.50 lakhs for eligible candidates under CSIS/CGFSEL.
* **Collateral-Free Loans:**
* PSBs provide collateral-free loans beyond ₹7.50 lakhs on a case-to-case basis.
* RBI advises banks not to mandatorily obtain collateral security for education loans up to ₹4 lakh, as per circular dated April 12, 2010.
* **PM Vidyalaxmi Scheme:**
* PM Vidyalaxmi scheme (launched on 06.11.2024) enables loans to meritorious students pursuing higher education, especially at top Quality Higher Educational Institutions (QHEIs).
* This scheme enables collateral-free, guarantor-free loans with a simple application process.
**Impact Analysis**
**Stakeholder: Public Sector Banks (PSBs) and Scheduled Commercial Banks (SCBs)**
* **Impact:** Required to adhere to RBI's guidelines and frameworks for loan policies and NPA resolution, and adopt the Model Education Loan Scheme (MELS).
* **Action Required:** Implement Board-approved loan policies, adopt MELS, follow the Prudential Framework for stressed asset resolution, and adhere to collateral-free loan guidelines.
**Stakeholder: Students/Loan Borrowers**
* **Impact:** Benefit from improved asset quality, need-based loans, collateral-free loans, and access to education loans through the PM Vidyalaxmi scheme.
* **Action Required:** Apply for loans under MELS and PM Vidyalaxmi scheme, meet eligibility criteria for collateral-free loans, and ensure timely repayment to avoid NPA status.
**Stakeholder: Reserve Bank of India (RBI)**
* **Impact:** The effectiveness of the regulations and directions issued by the RBI will determine the asset quality of education loans.
* **Action Required:** Monitor the implementation of the guidelines and frameworks, track the progress of NPA resolution, and make necessary adjustments to policies.
Key Entities Referenced
Reserve Bank of India (RBI): The primary regulator mentioned in the context of loan policies and recovery initiatives.
Non-Performing Assets (NPAs): The central issue addressed by the parliamentary question, specifically regarding education loans.
PM Vidyalaxmi scheme: Scheme launched to enable education loans to meritorious students through banks.
Model Education Loan Scheme (MELS): A scheme advised by the RBI for adoption by banks, providing need-based education loans.
Prudential Framework for Resolution of Stressed Assets under RBI (Commercial Banks – Resolution of Stressed Assets) Directions, 2025: A principle-based framework issued by the RBI for early recognition and resolution of default.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 2529
ANSWERED ON MONDAY, 15th DECEMBER, 2025/ 24 AGRAHAYANA, 1947 (SAKA)
NPA of Public Sector Banks
†2529. SMT. DHANORKAR PRATIBHA SURESH:
Will the Minister of FINANCE be pleased to state:
(a) whether it is a fact that approximately 16 per cent of educational loans disbursed by public sector
banks have become Non-Performing Assets (NPAs), if so, the State-wise statistics in this regard;
(b) the reasons as to why NPA ratios are high in States like Maharashtra, Kerala and Tamil Nadu despite
high loan disbursements and the details of the scheme being formulated by the Government to address
the main causes of the said problem such as limited employment opportunities and high education
fees;
(c) whether the Government has issued any specific time-bound directives to major lenders such as SBI,
PNB and Canara Bank for loan restructuring or NPA recovery to address the said issue; and
(d) the new policy initiatives being taken by the Government to improve the education loan
disbursement and recovery process in the future to ease the financial burden on students and reduce
risk for banks?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SH. PANKAJ CHAUDHARY)
(a) to (b) As informed by Reserve Bank of India (RBI), in terms of outstanding education loans, the
Gross Non-Performing Assets (NPA) of Public Sector Banks (PSBs) reduced from 7% in FY 2020-21
to 2% in FY 2024-25, thereby showing the significant improvement in asset quality of education loans
over the years. The state-wise information in this regard is not maintained by the RBI.
(c) to (d) Credit related matters of regulated entities (REs) are largely deregulated and the same are
governed by the Board approved loan policies of the REs framed under the ambit of relevant regulatory
and statutory requirements and terms and conditions of the loan agreement between the borrower and
the RE. RBI has advised the banks to put in place a Board approved loan policy and they shall take credit
related decisions as per the said policy, subject to the guiding principles of regulations.
Further, RBI has taken several initiatives to improve recovery and to resolve incipient /established stress
in banks including issuance of the Prudential Framework for Resolution of Stressed Assets under RBI
(Commercial Banks – Resolution of Stressed Assets) Directions, 2025 which is a principle-based
framework and provides for early recognition and resolution of default in a time bound manner.
All Scheduled Commercial Banks (SCBs) have been advised by Reserve Bank of India (RBI) to adopt
Model Education Loan Scheme (MELS), (last amended on 21.3.2024). The scheme inter alia provides
need-based education loan and no collateral security or third-party guarantee is required for loans amount
up to ₹ 7.50 lakhs, provided they are eligible for Central Sector Interest Subsidy Scheme (CSIS)/ Credit
Guarantee Fund Scheme for Education loan (CGFSEL).Public Sector Banks (PSBs) also provide collateral free loans beyond ₹ 7.50 lakhs, on case to case basis
as per their Board approved policies.
Further, RBI vide circular RPCD.SME&NFS.BC.No. 69/06.12.05 /2009-10 dated April 12, 2010, on
Collateral Free Loans - Educational Loan Scheme, has advised that banks must not, mandatorily, obtain
collateral security in the case of educational loans upto ₹ 4 lakh.
Moreover, PM Vidyalaxmi scheme has been launched on 06.11.2024, which enables loans through
banks to meritorious students so that financial constraints do not prevent any youth of India from
pursuing quality higher education. The scheme facilitates and enables education loans to meritorious
students who get admission in the top Quality Higher Educational Institutions (QHEIs) in the country
and enables meritorious students of these QHEIs to take collateral free, guarantor free education loans
through a simple, transparent, student-friendly application process.
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