Reni Rajan, New Delhi: Planning to apply for education loan for an MBA abroad? Well, now you will also get an insurance cover along with the loan.

Also Read: Is an MBA Worth It?

Many Indian students go abroad to study every year and most of them fund their foreign education through bank loans. Now, Indian banks are making it mandatory for applicants to have a life insurance cover to apply for these loans.

"We will be implementing this as it's beneficial in the long term. Right now, we can't say much about it, but it's necessary," Vijaya Bank CMD Prakash Mallaya says about the collateral insurance cover.

For banks, this is way to protect their investment. They have also suggested a formula for paying the premium for the insurance cover.

They say the premium will be paid to the insurance company by the student's parents or the bank will pay the premium and the borrower can pay this amount to the bank later. Students can also opt for the policy with the lowest premium amount.

"We are in talks with Kotak Insurance and a deal will be worked out in a month's time," CMD of Punjab National Bank, KC Chakrawati, says.

Most banks have already tied up with insurance companies to provide insurance facilities to education loan seekers. With banks burdened with bad debt, the insurance cover against education loans is the latest attempt by them to protect their investment.

(With Shishir Sinha)