Patna: Public sector banks received flak from chief minister Nitish Kumar and deputy chief minister Sushil Kumar Modi on Saturday at a function to mark the launch of the online transfer of education loans provided under the Student Credit Card scheme by the Bihar State Education Finance Corporation (BSEFC).

Previously, the loan disbursal under SCC, which happens to be part of Nitish's "seven resolves for a developed Bihar" was done by public sector banks. But its pace was pathetically slow and the government's entreaties to speed it fell on deaf ears, forcing it to establish BSEFC to run the vital scheme that aims at providing up to Rs 4 lakh to Class XII pass students for further studies and Class X pass students opting for polytechnic courses.

"We tried to ensure that students were able to get education loans under SCC from banks before establishing BSEFC. The state government also gave guarantee to the banks on the principal amount and interest. We guaranteed them that they would get Rs 160 for every Rs 100 they give as loan under SCC, but still the boys and girls were not getting them," Nitish said.

Continuing in the same vein, the chief minister said: "We'd signed an MoU with banks and had also offered third-party verification of the applicants so that fake people do not avail of the loans, but we didn't get the desired assistance from them (the banks). They have their own rules and regulations." Nitish also said that he tried to ensure that students do not have to visit banks many times for loans. "However, banks have their own style of working and we were not getting any benefit. Hence we thought to leave them and establish BSEFC for SCC scheme," the chief minister said.

Sushil said the banks will now face tough competition from the Bihar government in the education loan segment and they may have to lower their interest rates.

"Banks charge 10-11 per cent compound interest on education loans and give a concession of 0.25 per cent to girls. But the Bihar government will charge 4 per cent simple interest on loans under SCC, that too after the academic course and one year moratorium period. The students will also get loans between Rs 36,000 to Rs 60,000 for living while doing various courses," Sushil said.