The Kerala government has announced on Thursday, a support scheme to help financially backward families repay student loans.

Chief Minister Pinarayi Vijayan addressed a special session of the House to mark the 60th anniversary of the first legislative Assembly, announcing that the scheme would provide relief to debt-ridden families who had availed education loans. "It is not a debt relief programme, but to support the repayment of education loan during the four years after the repayment holiday," he said.

The scheme would have retrospective effect from 1 April 2016 and would be applicable to loans up to Rs 9 lakh. Reliefs provided under it are:

• Of the repayment liability above Rs 4 lakh, the government would share 90% of it in the first year, 75% in the second year, 50% in the third year, and 25% in the fourth year if the loans have not turned NPA (non-performing assets).
• For bad loans (NPA study loans) up to Rs 4 lakh availed before 1 April 2016, the government would share 60% of the repayment liability if the bank waived the interest.
• For loans between Rs 4 lakh and Rs 9 lakh (NPA study loans), the government would foot 50% of the principal amount up to a maximum of Rs 24,000 on a special package for closure of the loan.
• The government would also bear the repayment liability in the case of the student's demise or handicap due to an accident, provided the bank was ready to waive the interest.

The scheme assumes significance as it is announced at a time when students are facing immense difficulty in repaying loans because banks are selling a large number of its "bad loans", or loans that have NPA to asset reconstruction companies (ARCs) that in turn charge a higher interest rate.

For the last few years, bad educational loans are a severe problem for banks in Kerala. Out of the total study loans in the state, Rs 9,586 crore is outstanding and Rs 1,094 are NPAs, as per the State Level Banker's Consortium, the representative body of all banks in Kerala.

A loan is classified as an NPA if there has been a default in payment for more than 90 days after the moratorium period.

The Logical Indian welcomes this move by the government which helps financially backward students of the most literate state in India repay educational loans.