Education is the process of instruction aimed at the all round development of individuals, providing with necessary tools to participate

in day to day activities of the world. It dispels ignorance and boosts moral values in the individuals. It forms the basis for lifelong learning and inspires confidence to face challenges; besides providing skills to become more self reliant and increases awareness. Education not only impacts the human development and economic growth, but is the fundamental requirement of democracy. Through education, people become more responsible and informed citizens, and can voice their concerns and issues in political system of their society. It is an essential element for democracy and eradicating poverty. It also helps people in improving productivity, thus playing greater roles in economic life and earning a better livelihood for themselves and the society. Therefore, education is the key, which allows people to move up in the world, seek better jobs and ultimately succeed in their life. In India, getting education has been a big problem since long. A small minority in the elite class get access to excellent education facilities; whereas the poor practically get no education at all. One main reason for inadequate access to education in India is the high cost of education and lack of access to funding higher education. As per available data, over the years the governments share in overall education expenditure, which was 80 percent in 1983, went down drastically to 67 percent in 1999. The government spending as a percentage of GDP was a paltry 0.7% in the year 2008. This shortfall has been made-up by the private sector expenditure on education, which has increased by about 11 times in the last 15 years (Singh and Kaur 2008). It is mainly after Indian policy-makers, without much choice in this regard, cast the dice in favour of privatization in the 1990s. With the introduction of private player in education sector, the motive of revenue generation seems to have overtaken the social cause. This has probably led to a significant increase in the cost of pursuing higher education; resulting in, things getting out of reach of the masses. This has further led to the students looking for funding their higher education from external sources, like government and private sector banks, to meet their high education expenses. But this is easier said than done. Not all the students are fortunate to get the benefit of educational loans from banks. This not being a profitable business idea, the banks are reluctant to extend the study loans. According to a study by ASSOCHAM, less than 3 percentage students, mostly belonging to middle income families in

India avail of education loans against 85 per cent in the UK, 77 per cent the US and 70 per cent in Germany and France. Many students desirous of pursuing higher education complain about difficulty in obtaining approval of educational loans by banks. This aspect became a motivating factor for pursuing this study on education loan. Therefore, the objective of this study is to analyze the prerequisites looked for by the government as well as private sector banks for grant of educational loans to students for their higher studies. At the same time this paper also identifies the factors influencing the banks for sanction of educational loans. Besides, it tries to assess, as to which of these factors, have greater impact and which ones have lesser impact. This paper uses probit model to achieve this end. Education sytem in india. India is fast emerging as one of the biggest knowledge economy of the world. It has one of the largest pools of talent with excellent educational background, qualifying them for numerous higher educational programs in India and abroad. The cost of education is rising. However, their insatiable desire to acquire and enhance knowledge will stand them in good stead, in competitive times. Despite all odds, towards meeting this end, the students are ready to walk that extra mile. The opportunities are abundant; and the avenues to attain a students career goals are immense; hence, Indian students want to grab these opportunities and make use of it to their advantage. For achieving their objectives, they are ready to stretch beyond their capacities and means. When their personal financial resources do not provide them with sufficient support, they go for external finance. This is where the role of financial institutions assumes great importance. The Government of India is also lending an active support, by relaxing the norms for granting educational loans to students and pushing the public sector banks to extend loans. In the working paper of Kapur and Mehta (2004), it is observed that the privatization is not a result of change in ideological commitments of the state, the judiciary or Indias propertied classes; but, has resulted from a breakdown of the state system and an exit of Indian elites from public institutions. They thus feel that ground has been conceded to private sector institutions both within the country as well as abroad. They further add that due to the discretionary actions of the state, the education system remains suspended between over-regulation by the state on the one hand, and a discretionary privatization that is unable to mobilize private capital in productive ways, leading to a sub-optimal structuring of higher education. Singh and Kaur (2008) conclude

that the academic inflexibility has boosted the rapid development of private initiatives in higher education; and perhaps, the providers/stakeholders in many of these private institutions are the loners who struggled to change the formal system to cater to the needs of the students. Agrawal and Meenu (2008) feel that the role of basic education and an increase in contribution of the government, as a percentage of Gross National Product, that is to be devoted to universities and research institutions, are the important determinants to ensure balanced development of education and an improved education systems at all levels. Privatization and commercialization of education will retard our human resource development at least in two ways (Mallick 2005). First, by shaping education prohibitively expensive and thereby making it unaffordable for the vast multitude, and, secondly, by determining the education priorities, not according to our national needs but to those of a minuscule minority of blood-suckers.