The Centre is actively considering roping in regional rural banks (RRBs) under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) in an earnest attempt to push banks to disburse more education loans.

“We are examining this. . . whether a separate structure is required or this can be incorporated within the existing architecture,” an official familiar with the matter told ET.

The CGFSEL covers default in education loans of up to Rs 7. 5 lakh without any collateral security and third-party guarantee. Currently, the fund extends guarantee cover against default in education loans sanctioned by public, private and foreign banks.

It is worth noting here that the move assumes significance as the Centre is rolling out several policy measures to further boost the regional lenders.

On August 25, the Centre evaluated the growth and disbursal status of education loans by public sector banks (PSBs).

The financial daily cited the official as saying, “Banks were asked to look at the delays in the sanctioning and disbursal process, and fast track the processes.”

State-controlled banks have achieved about 9 per cent of the Rs 20,450-crore education loan target for FY23 till June this year. Integrating RRBs under the credit guarantee fund will push education loans, the official mentioned.

In FY21, sanction amount under the guarantee cover stood at Rs 19,175 crore, according to the latest report available.

Banks have highlighted the poor growth in education loans due to rising bad loans in the category. Another official with knowledge of the matter said the guarantee shield will further aid RRBs to lend further.

Approximately 7. 82 per cent of the total outstanding education loans have been classified as toxic loans till July this year. The official mentioned that RRBs can fix the issue and the Centre has already undertaken steps to bolster them.

Finance Minister Nirmala Sitharaman said last week that RRBs need a lot more support in digitalisation and sponsoring banks need to give them more attention.