HDFC Education Loan Unit, Credila Financial Services, hopes to grow its loan book 2.5 times in the current financial year.
Credila, in which HDFC raised its stake to 51 per cent by acquiring an additional 10 per cent early this month, plans to leverage 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”.
Looking at the scale of disbursements by public sector banks (PSBs), which are main players in the education loan business, Credila has a wide distance to cover.
PSBs disbursed educational loans worth Rs 8,000 crore to 320,000 students in 2009-10. Their outstanding loans were Rs 35,628.33 crore at the end of March 2010.“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,” he said.
The company is also in talks with other banks for diversifying sources of funds. It has a line of credit from Punjab National Bank. CARE has assigned a “BBB-“ rating for its term loan facility (Rs 100 crore).
At present, Credila primarily lends, around 65 per cent, to students studying within the country. While the lending is largely for management courses in India, in the United States, the disbursement is largely for masters in science, followed by management courses.
“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,” said Bhonsle.
Elaborating on where does Credila stands out vis-à-vis banks; Bhonsle says most loan facilities that banks give are identical. Plus, banks sanction loans only after a student gets admission. In contrast, non-banking financial companies, based on domain expertise and their understanding of the background, approve loans before admission.
Credila claims to be more updated on courses and career prospects for students, and this gives it an edge in being flexible. Its gives loans against less security (collateral) compared to commercial banks. “We are flexible. Our domain expertise helps us extend this facility in such a large market of opportunity,” said Bhonsle.
Besides flexibility, its approach is different. A person seeking an education loan will have to walk into the bank branch, but Credila seeks out student 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 back-end operations are updated on education institutes. It has a database of more than 20,000 colleges.The company offers loans between interest rates of 9.75 per cent and 12.5 per cent and provides loans up to Rs 50 lakh, unlike PSBs, which do not lend more than Rs 20 lakh.