Mumbai, July 20 () Education loan market is poised to develop after HDFC acquired a majority stake in Credila, which started operations in March 2008.
In January 2008, DSP Merrill Lynch invested in the company. Now, HDFC bought out DSP Merrill. Credila who had till then disbursed only Rs 20 crore, was sanctioned more than Rs 2,000 crore and in the last fiscal, it disbursed nearly Rs 1000 crore.
In 2012, Credila received more than 90,000 online applications for a combined loan amount of over Rs 8,000 crore. It was more than Credila could handle, admits COO Anil Bohora.
Credila has managed to build a good reputation among students in a short time. Students studying abroad are those who comprise nearly half its borrowers. The reason is probably because of the high fees and need for loans for studies overseas.
Credila has tie-ups with a number of educational institutions abroad including those from Harvard University and Manipal University, as well as with coaching institutes for engineering and management. These institutes refer students who need education loans to Credila, if they need a loan.
Credila’s main rivals in the education loan business are State Bank of India and Canara Bank. They are the leaders in the education loans segment.
SBI’s education loan totalled Rs 11,500 crore, while Canara Bank’s was at Rs 3,900 crore, as of March 31, 2012. The case of the bad education loans from state-owned banks has touched 7%. So, the banks are getting cautious of lending to students.
Credila has so far kept its bad loans at just 0.07 per cent of the portfolio. It earned a net profit of Rs 6 crore for the first time for the period April-to-January 2012/13.
But, analysts feel it is too early to term Credila as a success. ICRA ratings firm said since the company has not completed a full business cycle by getting the money back on the loans, the quality of Credila’s portfolio is untested.
Credila has started operating from HDFC offices in a dozen cities. It is also using HDFC’s sales and marketing team. HDFC is helping Credila raise funds at lower interest rates which help Credila offers education loans for a duration of 5 to 10 years. Earlier, it raised funds mostly for a shorter duration while the loans were for a longer duration. HDFC which gives housing loans for 20 years is giving valuable expertise.