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By SHEFALI ANAND

It's the final innings for admissions to the prestigious Indian Institute of Managements and other
business schools.

In a few days, students will know whether they have made it or not. If you are chosen, you
may not get too much time to celebrate – you have to figure out how to pay for that expensive
education.

Several IIMs recently increased their fees by 100,000 rupees or more. A

two-year management of business administration program at the coveted IIM
Ahmedabad now costs around 1.4 million rupees ($31,500), while the fees are
1.35 million at IIM Calcutta and 1.3 million rupees at IIM Bangalore. Only a
Shefali Anand small percentage of students qualify for breaks in fees at these schools.

Luckily, there's help at hand.

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India's banks have been increasingly boosting their education loan portfolios and new players When Is it OK to Sell Your ULIP?
are entering the market. In December, home loan giant HDFC Ltd. bought a 41% stake in
MNCs in Rural India: At a Turning Point
non-banking financial company Credila Financial Services, which specializes in giving education
loans. HDFC hopes to eventually buy out the entire company. Wharton's Raju: "Consumers in Rural Areas Care for Value
More than Price"
For banks, education loans are bitter-sweet – they carry a higher interest rate than some other
loans like home loans, but they are also more risky. Due to Reserve Bank of India rules, banks
are not allowed to accept any security or collateral for loans of up to 400,000 rupees.
About The Column
Maximum Money: Personal finance strategies to maximize your
Education loans are still a small portion of wealth through prudent saving, investing and planning in India.
banks' loans portfolios. But the government
considers education loans to be one among About The Author
a list of "priority-sector" loans so government
banks sometimes give these loans to fulfill Shefali Anand is a staff reporter with the Wall Street Journal in New
Delhi, writing about personal finance for an Indian audience. Prior to
their quota for priority-sector lending. And in that, she was based in the Journal's New York bureau, where she
recent years, several private banks have covered America's $11 trillion-mutual fund industry and contributed
to personal finance and stock market coverage. Previously, she
been increasingly focusing on this area.
worked with The Indian Express newspaper in Mumbai, as a
business reporter and sub-editor.
Unfortunately, many deserving students still
Triambak Sharma/ www.cartoonwatchindia.com Ms. Anand holds a master's degree from New York University, New
struggle to get loans. Banks ask for a
York, specializing in business and economic reporting. She also has
co-signor to the loan – typically a parent -- a diploma in advanced media studies from Xavier Institute of
and for 100% collateral to cover the loan even when it contravenes government rules. That can Communications, Mumbai, and a bachelor's degree in commerce
from Jesus & Mary College, University of Delhi. Ms. Anand was the
be very tough for the poor to afford, says K. Srinivasan, co-ordinator of Education Loan Task first winner of the Wall Street Journal's Journalism in Asia
Force, an online activist group which works with students of Tamil Nadu. "Because of lack of Fellowship, which sponsors one journalist from Asia to study in New
finance, many of the students with more than 90% marks (in school) have to work at tea York. She has also won awards from the New York Financial
Writers Association, and the South Asian Journalists Association in
stalls," says Mr. Srinivasan. New York.

Banks typically give loans of up to 1 million rupees for study within India and up to 2 million
rupees for studies abroad. For loans of more than 400,000 rupees, you need to put in some
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money of your own -- 5% for domestic education and 15% if the student is going abroad. For
large loans, banks accept a number of assets as collateral, such as property owned by you or
your co-signing parent, a life insurance policy with a surrender value, or fixed deposits in the
bank.

To get a loan, you must already have admission in what the bank considers to be a worthy U.K. Tories And Twelve Dead In Regional Vote
institution. Many banks publish a list of courses which qualify for loans, but they don't list each Lib Dems Resume Russian Mine Tests Merkel's
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and every institution approved by them. Which means you will still have to go to your nearest 1:54 1:03 0:59
bank to find out for yourself. IIM's qualify.

While banks are required to lend to all More in India Subsection

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eligible applicants, it may be easier to get India Court Backs Mukesh Ambani
Looking to the U.S. for Student-Loan Ideas:
the loan if you already have an account or
Indian banks remain reluctant to lend to students Ambani Opera Has a Few Acts Left
whose parents are rickshaw drivers or porters. other relationship with a particular bank.
One solution might be to follow the West's Mastek in Acquisition Talks
government-funded loan model. At the moment, interest rates on these loans
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vary from 11.25% to 12.75% depending on
U.N.: India's Economy Likely Expanded 7.2% Last Year
the amount of loan. These rates can change during the term of the loan, in case the Reserve
Bank of India raises broad interest rates.

There is a lot of variation though. Students of IIMs and some other prestigious schools can get Most Popular In India
better deals. Union Bank of India, for instance, is charging only 10.5% to students admitted to Read Emailed Video Commented
a select number of schools. Women pay 0.50 percentage point less.
1.

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How to Pay for IIMA or Harvard - WSJ.com http://online.wsj.com/article/SB127192427389980923.html?mod=WSJ_la...

Unlike banks which typically charge a fixed rate for a certain category of students, HDFC's Change Can Be Costly
Credila charges different rates depending on the school and the student's grades. Credila
country head Prashant Bhosle says that this ensures that all students have a good shot of
2. Five Must-Ask Interview Questions
getting a loan, even if it's at a little higher cost. Credila's interest rate ranges from 9.75% to 3. In Job Hunting, Honesty Is Still the Best Policy
12.5% currently.
4. MNCs in Rural India: At a Turning Point
You have to give the usual list of documents to support the fact that you do have admission to
the particular school, your and the co-signor's bank account and income tax statements, proof 5. When the Boss Is the Problem
of residence, and statement of assets and liabilities.
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Students planning to study abroad can also apply for loans, though sometimes they face a
chicken-and-egg situation. Some foreign colleges, such as those in the U.S., require a proof of
finances at the time of admission. However, most banks in India don't sanction a loan till the
student has a confirmed admission in the given college.

HDFC-backed Credila has a solution to this. It provides a letter of credit on behalf of the
student which typically satisfies the college, and then converts it to a real loan when the
admission goes through.

Students are expected to start repaying their loans within six months of landing a job or after
one year of graduation, whichever is sooner. Most banks require that students pay simple
interest on the loan even as they are studying. The loan is extended for five years to seven
years typically.

Bankers advise students to be careful while selecting the course and college they want to get
in to, especially given the large number of new institutions that have sprung up around the
country. Just because you're hungry for admission, don't rush into a program which may not
result in a good salary and future, says C.S. Jain, head of retail banking at IDBI Bank Ltd.

Write to Shefali Anand at shefali.anand@wsj.com

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