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Points to consider while getting a personal loan for higher education

With the rising cost of living, loans have become increasingly important in many people’s lives, including paying for school. These personal loans are beneficial to everyone who wishes to further their education. In general, lenders do not provide education loans to students on their own. Most lenders want a co-applicant, usually one of the parents. So that they have some recourse if the loan goes into default.

personal loan

To apply for an education loan, one must have a letter confirming the admission to a course. Lenders would not give an education loan without confirmation. These loans are often used to finance tuition and accommodation expenses. As well as the cost of books and, in some cases, computers. Some lenders have set limits on the amount of money they will provide for specific courses.

A different option for personal loans

Personal loans, on the other hand, give borrowers more flexibility. “A more convenient option would be to go for a personal loan instead,” says Gaurav Jalan, CEO, and Founder of mpocket.

Because lenders do not ask for reasons for the personal loan such personal loans for education can be used to cover any education-related expenses; such as course fees, lodging, travel, living expenses, course material, and even smaller miscellaneous charges that may arise. A personal loan application is also less time-consuming, requires less paperwork, and has a speedier disbursal period.

Gaurav Jalan, CEO, and Founder of mpocket

“Such unsecured personal loans do not require collateral and do not require a co-applicant,” he continues. This kind of loan, on the other hand, will normally have a lower maximum loan amount. And higher interest rates than an education loan.” Parents can apply for small-ticket or large-ticket personal loans on behalf of their children or students, depending on their needs at the time. “Personal loans can assist reduce the financial burden of schooling in today’s society; without all the stress associated with applying for an education loan,” Jalan adds.

Regardless of whether they apply for a personal loan for education or an education loan, experts recommend that all borrowers take notice of all repayment alternatives, loan length, and interest rate. “The borrower must analyze all options before making a final selection on a certain financing option,” Jalan continues. Only take out a loan if you’re certain you won’t be able to pay for these fees out of pocket”. As a result, carefully analyze your needs and request a specified loan amount. For more such updates, keep watching this space!

 

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Nirmala Sitharaman to launch National Monetization Pipeline on Aug 23

According to an official release, Finance Minister Nirmala Sitharaman will launch the National Monetization Pipeline (NMP) on Monday. The National Monetisation Pipeline will identify the government’s infrastructure assets for auction over the next four years.

finance minister- monetization pipeline

On Sunday, the Niti Aayog stated that the NMP is a four-year pipeline of brownfield infrastructure assets from the central government. In addition to offering clarity to investors, NMP will act as a medium-term roadmap for the government’s asset monetization initiative.

The Finance Minister made a number of key statements about asset monetization in the Union Budget for 2021-22. Moreover, she emphasized that the government is searching for innovative ways to raise funds.

monetisation pipeline

Why do we need National Monetization Pipeline (NMP)?

The NMP aims to attract more foreign investors and encourage alternate financing for infrastructure assets.

Sitharaman stated in her Budget speech that monetizing operating public infrastructure assets was a crucial financing option for new infrastructural development. The government will establish a National Monetisation Pipeline of potentially monetizable brownfield infrastructure assets. A dashboard for asset monetization will also be built to track progress and provide visibility to investors.

finance minister to launch national monetization pipeline

The government views asset monetization as a strategy for infrastructure enhancement and maintenance, instead of only a funding mechanism. According to Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey. The government is finalizing Rs 6 lakh crore worth of infrastructure assets for monetization. This includes national highways, mobile towers, stadia, railway stations, and electricity grid pipes.

“A national monetization plan of roughly Rs 6 trillion is in the process,” Pandey said. He also mentioned that it will include assets such as pipelines, electricity grid pipes, national highways, ToT (toll-operate-transfer), and so on. The launch of the NMP book will be in the presence of Niti Aayog Vice Chairman Rajiv Kumar and Niti Aayog CEO Amitabh Kant. As well as, the Secretaries of relevant ministries whose assets constitute the monetization pipeline.

For more such updates, keep watching this space!

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Rajya Sabha clears Factoring law to draw 9,000 NBFCs, boost MSME cash flow

The Rajya Sabha gives its approval to the amendments to the factoring law, on Thursday. These amendments will enable as many as 9,000 non-banking financial companies (NBFCs) to participate in the factoring market, instead of just 7 now. The move will give a boost in cash flow to small businesses, said finance minister Nirmala Sitharaman.

Earlier, the Lok Sabha already cleared the Factoring Regulation (Amendment) Bill, 2020, on Monday. Speaking on the Bill in the Rajya Sabha, the finance minister said, “You can imagine the number of MSMEs that will directly benefit because of this.”

What does Factoring mean?

Essentially, factoring is a transaction where an entity (like MSME) sells its receivables (i.e., dues from a customer) to a third party (a ‘factor’ like a bank or NBFC) and collects immediate funds. It helps a firm to fulfill its working capital requirement. Many MSMEs, participate in the factoring business with receivables. It helps MSMEs whose payments against their supplies are stuck.

msme

However, due to certain restrictive provisions in the extant law, necessary amendments were brought in to widen the participation of entities, in the factoring business. These entities, especially NBFCs will help in expanding the avenues of working capital credit to even small businesses. The Bill also empowers the central bank to monitor and create norms for better oversight of the $6-billion factoring market.

According to a report of the parliamentary standing committee on finance, which endorsed the Bill. Despite the growth in recent years, the factoring market accounts for only 0.2% of India’s GDP. The numbers are way behind the comparable developing economies such as Brazil (4.1%) and China (3.2%). Moreover, the factoring market worldwide will see a projection and reach $ 9.2 trillion by 2025.

The report submitted by the House panel in February stressed the need for the RBI to build sufficient regulatory resources to ensure effective supervision of factoring activities. This becomes more important than ever before, with the implementation of the new norms. Because, a large number of players may take part in such businesses now, after the amendments.

For more such updates, keep watching this space!

Daily News

Yes Bank, Indiabulls Housing Finance sign co-lending agreement

Yes Bank and Indiabulls Housing Finance have entered into a co-lending agreement for home loans. The two finance giants, Yes Bank, and Indiabulls Housing Finance have come in a partnership to synergize capabilities and enhance retail experiences for home loan customers.

yes bank and indiabulls

On Wednesday, the two finance giants said in a joint statement; the partnership aims at synergising capabilities to provide an efficient and seamless experience to retail home loan customers. The statement also adds that the Reserve Bank of India’s co-lending framework provides a collaboration tool for both banks and non-bank financiers. Which will provide a low-cost funding model of a bank and the cost-efficient sourcing and servicing capabilities of a non-bank.

In November 2020, the Reserve Bank of India came up with guidelines on co-origination of loans or co-lending of loans. Under this framework, banks and NBFCs (non-banking finance companies) can lend to priority sectors or economically weaker sections. The main idea behind the collaboration framework is to encourage credit flow to this segment.

What is the co-lending model (CLM)?

yes bank and indiabulls co lending

In the co-lending model (CLM), banks have the permission to co-lend with all registered NBFCs (including HFCs). However, the loan will be based on a prior agreement between the banks and NBFCs. Moreover, the co-lending banks will be taking their share of the individual loans on a back-to-back basis in their books.

How do the two financers approach this partnership?

According to Rajan Pental, Global Head, Retail Banking, Yes Bank, The partnership is in line with Yes Bank’s strategy of expanding its retail franchise through a mix of organic and partnership-led origination models. The bank is eyeing forward to further build a profitable and quality home loan portfolio through this partnership.

Gagan Banga, Vice Chairman and CEO, Indiabulls Housing Finance expressed his optimism for the partnership. According to him, they can now leverage Yes Bank’s deposit-led franchise and complement that with the technology-led distribution of Indiabulls. Thus, it will help in providing efficient solutions around home loans to a wide gamut of customers across geographies, ticket sizes and yield spectrum. The collaboration will provide balance-sheet light growth and profitability to the two firms.

How will borrowers benefit?

From the borrower’s point of view, the idea makes a lot of sense as it will make the process faster. NBFCs process loan applications much quicker than banks. Also, NBFCs have a better reach among borrowers than the banks in many geographies. NBFCs can get bigger and top-rated borrowers on their books through this arrangement. Whereas it wouldn’t have been possible otherwise, according to a former SBI senior executive.

For more such updates, keep watching this space!

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Reforms help banks recover Rs 5.5 lakh crore of bad debt: Govt

Reforms help banks recover Rs 5.5 lakh crore of bad debt, according to the central government. The government took many steps in the pursuit of recovering the bad debt in the country. These reforms hugely contributed to the active recovery of the money stuck in these bad loans.

money bad debt

The steps taken by the government such as enacting the Insolvency & Bankruptcy Code (IBC) helped in the recovery of around Rs 5.5 lakh crore of bad debt. Out of this, an approximate value of Rs 1 lakh crores was recovered from accounts that were technically written off.

Considering that the build-up of non-performing assets (NPAs) is lower than anticipated. The government is also positive in its beliefs that the state-run lenders are well poised to meet credit requirements. As per the state government sources, a provision coverage ratio of 83.7 percent is protecting the public sector banks against any potential hit.

How pandemic is affecting the recovery?

A senior finance ministry official mentioned that despite the ongoing pandemic, the turnaround for public sector banks has been remarkable. According to the official, the recent reforms and the proposed asset reconstruction company will further clean up their balance sheets. Moreover, it will make fresh capital available from the sale of bad assets, which will again push credit growth.

The government believes that the Rs 8 lakh crore of write-offs in the past seven years are technical in nature. These write-offs will bring adequate transparency to the bank balance sheets.

bad debt recovery

The official said that the banks put forth every attempt to recover even after writing off a loan. A sum of Rs 99,996 crore is recovered from such loan accounts. Which includes the IBC process in cases of Bhushan Steel, Bhushan Power & Steel, and Essar Steel. Banks also recovered their money from other write-offs as well such as Kingfisher.

Since 2018, the government has reportedly recovered Rs 3.1 lakh crore. However, the process is still ongoing and it will expectedly recover from more such loans. In the process, Banks used multiple sources such as internal accruals, fundraising from the market, and capital infusion by the government, in order to comply with the regulatory requirement.

For more such updates, keep watching this space!

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RBI Aims to Tackle Microfinance Burden

Reserve bank of India raised the lending cap for MFIs (Microfinance Institution) to Rs 1.25 lakh. RBI stated that the primary objective is to address the concerns related to the over-indebtedness of microfinance borrowers. The decision is to enable the market mechanism. It is considered to bring the interest rates downward in the microfinance sector. This is a framework that will regulate microfinance loans.

RBI and Finance institutes

Microfinance Sector

It consists of more than 3000 microfinance companies MGIs, NGOs, and MFIs. These are financial companies that provide small loans to people who do not have any access to bank facilities. In India, all loans worth Rs 1 lack or below comes under microloans.

Finance sector

Moreover, the top microfinance companies in India are estimated to account for almost 74% of total loans outstanding. These are the bankers and leaders who provide microfinance services. These services can be deposits, loans, payment services, money transfers, and insurance.

It serves the needs of economically marginalized populations. Bandhan Financial services limited is the largest microfinance company based out of Kolkata. MFIs in India are of two kinds. Those regulated by the Reserve Bank of India are called Non-banking financing companies, or NBFC MFIs. And some are those which are run by non-profit trusts and societies.

Breaking Barriers defined in the decision

  • A common set of rules for microloans, irrespective of the lender
  • Microloans to cap at 50% of the household income to avoid indebtedness
  • Interest rate cap on MFIs to go, allowing multiple lending
  • All lenders have to spell minimum, average, and maximum rates
  • A common definition of microfinance loans for all regulated entities
  • No pre-payment penalty
  • no requirement of collateral
  • greater flexibility of repayment frequency
micro Finance

According to the RBI, there should not be any pre-payment penalty. There should not be any disclosure of pricing. The associated data needs to be an ordinary simplified sheet. However, should display a common interest charged on these loans.

For more such updates, keep watching this space!

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Russia Plans To Cut Dollar Holding In Wealth Fund To Zero!

Sovereign wealth funds of Russia will completely remove Dollar assets amid US sanctions. Both Russia and China have declared to take the joint initiative to end western dominance on International Payments System and Dependency on the US dollar.

GOI has a 49% stake in National Investment and Infrastructure fund NIIF and the rest is owned by notable investors such as HDFC Bank, Axis Bank, Kotak Mahindra life, etc.

What are Sovereign Wealth Funds?

These are the state-owned investment funds that help the government in investments, the flow of wealth, crisis management, etc. These funds are generally for investment in bonds, stocks, gold, and real estate, etc.

What will be the effect on the dollar?

Every big country’s economy maintains one or more than one national wealth fund. According to the World Economic Forum, by 2021- the Norwegian Govt Pension fund is the world’s richest sovereign wealth fund with $1.1 trillion.

dollar cut

Will the dollar still be the Global Currency of Trade?

China has towering ambitions regarding the international use of the Renminbi. China wants complete dominance of Renminbi in all international lending, Trading, borrowing, and investing. In 2015, China launched Cross Border Interbank Payment System. It may help China Internationalize the use of the Renminbi. And many countries are connecting with China. IMF, in 2018 said that Yuan matches the fundamentals of International Reserve Currency. But after the war with the US tariff, it fell. During the 2010-15 period, the use of Chinese International Transaction increased by 21 times.

Now, Russia also taking steps to stop the usage of the Dollar. It is the process of De-dollarisation. Russia is intensifying De-dollarisation continuously after 2014. Russia also making International Monetary Transfer System like China. With continuous deteriorating US-Russia relations, Russia’s relation with China is substantially improving.