BUSINESS CASE

FILE
Education Loan Overview

Education loans provide funding essential to foster and empower the country's human capital to
overcome the financial constraints they face to meet the rising education cost.

Industry Dynamics

India’s gross enrollment ratio for higher education is around 27.1% for FY20-21 against a world
average of 39%(1), indicating a vast untapped market. Further, India's education loan industry is
relatively underpenetrated compared to other developed countries like the USA.

The education loan portfolio forms only a tiny fraction of the retail loan portfolio of all the
commercial banks in India (approx. 3.3 %) (2). Still, it holds a special significance in terms of the
nation’s upskilling required for boosting productivity and efficiency in an economy.

In India, around 90% of education loans are disbursed by Public Sector Banks. Private sector
banks and regional rural banks (RRBs) accounted for about 7% and 3% (2) of total education loans
outstanding, respectively (as of end-March 2020)

Further, the rising Cost of Education (COE) has made it difficult for parents to invest in their
children’s education. The pandemic has added additional pressure on parents’ finances, creating
further demand for affordable financing options to manage education-related expenses. It is
estimated that 1 in 5 students find it difficult to cover their fees, even after a year in college.

The education loan industry is thus on the rise, and players are leveraging the opportunity to
address the custom customer pain points. Further, the student chooses a lender after considering
factors such as the application process, interest rate, repayment flexibility, processing fee, etc.

HDFC Credila

HDFC Credila, a wholly owned subsidiary of HDFC Ltd., is India's first dedicated education loan
company that pioneered the concept of a specialist education loan lender. HDFC Credila helps
students to fund their higher education both in India and overseas with a specialized focus and
an in-depth understanding of their requirements. It leverages its domain knowledge and
expertise to offer customized products for students, making the company stand out as a leader
in the education finance industry. The company evaluates a loan application based on multiple
parameters, such as the student's academic and financial background to analyze their
creditworthiness. This ensures that the company can offer competitive loan products and services
to address varied customer needs.

Students can also get their education loan pre-approved even before they start applying to foreign
universities. The company emphasizes its customer experiences and ensures its policies and
regulations are made with a customer-centric approach. For example, it is the only lender in the
industry that disperses a certain percentage of the loan before the visa process for its abroad
loans to facilitate a smooth customer experience.

It has funded students across India to over 2100+ unique educational institutes across 35+
countries. The critical elements of their loan offering are attractive ROI, full fee reimbursement,
a long-term loan with lower EMIs, and a loan against the property.

Loan Products

HDFC Credila Offers education loans for students who want to pursue higher studies in India and
abroad. The company emphasizes its customer experiences and ensures its policies and
regulations are made with a customer-centric approach. For example, HDFC Credila is the only

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lender in the industry that disperses a certain percentage of the loan before the visa process for
its abroad loans to facilitate a smooth customer experience.

Three Broad categories of HDFC Credila offerings are:

i. Higher Studies in India: HDFC Credila has specialized products for courses like full-time
and Executive MBA programs, MS, MBBS, MD, Clinical Research, Engineering, etc. Longer
courses like 4–6-year MBBS programs are also funded with principal repayment post-
course completion.
ii. Higher Studies in USA: HDFC Credila provides customized products for students that
plan on pursuing higher education in the USA(Loan Min amount - 1,00,000; Max - No
limit), which covers 100% of their tuition fees and up- 100% of other expenses including
living and hostel expenses, traveling expenses, examination fees, library/laboratory fees;
purchase of books / equipment’s/instruments/uniforms; passage money for studies into
India; purchase of computers/laptops that are considered necessary for the completion of
the course as decided by HDFC Credila.
iii. Higher Studies Abroad (Foreign Countries except for USA): With an increasing
number of Indian students availing loans to pursue their education in countries like
Canada, France, Dubai, Ireland, Germany, etc., HDFC Credila offers a range of customized
loan solutions for each country. Offering customized solutions has made HDFC Credila the
preferred loan provider of thousands of students studying hundreds of different courses,
in over 1000+ institutes, across 35+ countries.

Current Roadblocks

Customer loyalty for education loan providers remains challenging as customer association with
the brand generally ends as the student pays the last installment of their education loan. The
brand aims to stay relevant to a student over a larger cycle and further envisions increasing value
for the customer by developing loyalty programs.

Also, HDFC Credila does not have a functional referral program to incentivize any existing
customer to recommend its service to more prospective students. Further, the customer
experience remains a prime factor for inspiring customer loyalty & HDFC Credila aims to enhance
the overall customer experience throughout the customer journey from loan application to loan
disbursement.

A significant part of the education loans by HDFC Credila is currently limited to postgraduate
programs - and expansion of services beyond current offerings remains a prospective avenue to
ensure improving customer engagement.

Case Deliverables

You are the in-house consultant for the company, and you are required to

i. Identify the best industry practices for the referral program. How should HDFC Credila
incorporate them?
ii. Define the KPIs and formalize methods to track the efficiency of the referral program.
iii. Suggest strategies to improve
a. customer loyalty.
b. customer retention
iv. Identify new product or service offerings that HDFC Credila can explore for its existing
customers.

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References:

(1) https://www.education.gov.in/sites/upload_files/mhrd/files/statistics-new/aishe_eng.pdf

https://www.statista.com/statistics/1149341/india-gross-enrollment-ratio-for-tertiary-
education/

(2) https://rbi.org.in/Scripts/bs_viewcontent.aspx?Id=3998