Published On: Wed, May 25th, 2011

HRD plans priority sector loans for new educational institutions

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Human Resource Development Ministry is planning to give special financial privileges to new educational institutions in order to boost private sector participation in higher education. The HRD ministry plans to ask the finance ministry to include bank loans to new colleges or universities in the priority sector that needs to repay at lower interest rates than others, revealed top government sources.

The ministry plans to offer loans to new institutions at ultra-low interest rates – about 4 % — through a proposed National Education Finance Corporation (NEFC) which will also act as guarantor to student education loans. But the Planning Commission has objected to the proposed NEFC offering ultra-cheap loans to new institutions.

If the proposal gets a nod from the finance ministry then the new educational institutions will get loans at interest rates of about 7%, higher than the 4% the NEFC would have offered, but lower than ordinary bank rates.

The ministry is considering the move as a push towards achieving the ambitious target of increasing India’s gross enrolment ratio (GER) in higher education from 12.4% at present to 30% by 2010. The target is set as a priority by HRD Minister Kapil Sibal. According to government estimates, India will need an additional 1500 universities by 2020 to meet this GER target.

The government has also repeatedly argued that a paucity of funds means it alone cannot start and run all these additional higher educational institutions. Therefore, the ministry is pitching for increased private participation in the education sector of the country.

[Source: Hindustan Times]