Education loans hit hardest as bad debt rises in personal loans

Bad debt in the personal loans sector is increasing, with defaults highest in the education segment and lowest in housing, according to an RBI report.

Non-performing assets or NPA in education personal loans are at 3.6 percent, compared to 1.8 percent in credit cards, 1.3 percent in auto loans, and 1.1 percent in housing loans, as per the central bank’s Financial Stability Report for June 2024.

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Experts quoted by Moneycontrol attribute the rise in education loan defaults to more students opting for studies abroad, which leads to an increase in NPAs during the peak season.

Despite these issues, the RBI report noted a broad-based improvement in the asset quality of Scheduled Commercial Banks or SCBs across personal loan segments.