Banks open wallets as IIM aspirants fret over fee hikes

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NEW DELHI: The recent fee hike at IIMs has not only created a stir in the academia, but also raised concerns among IIM aspirants and their parents. Although the hike has generated mixed reactions from students, thousands of MBA aspirants at the threshold of joining IIMs are worried about arranging finances.

Abhimanyu Singhi, a graduate from St Stephen’s College, Delhi, is one such example. He has offers from two IIMs, but is worried about the fee hike, “I feel that the hike is inexplicable because most of the B-schools get huge funds from the government. But now an MBA degree can easily cost more than Rs 5-6 lakh a year, which is more than what a lot of people even earn in a year.”

Agrees Ankit Agrawal, who has two years of experience, working with an MNC and looks forward to fund his education from his savings. “Many of us fund our education from our savings. Such increase in fee is very difficult to absorb. Only a few students are covered under scholarships, where 50-60% of the fee is absorbed, but the rest are left in despair.”
The solution may be around the corner. “I think availing of loans is the only option for most students now. The expected interest rate hikes will further hurt our prospects,” adds Mr Agrawal.

Since more IIM aspirants are expected to avail of loans this year, many banks have agreed to raise the bar of their educational loan offerings, to correspond with the higher fees. “SBI offers two educational loan options; general and scholar. Scholar loan is meant for institutes like IIM, MICA and NID, which are usually up to Rs 10 lakh for an entire course. We shall be ready to offer more loans this year since the fee has been hiked and at competitive rates. Our PLR is 12.25%, but we offer educational loans at 10.75%, which can be further negotiated,” says SBI (Gujarat) chief general manager HC Pattnaik.

SBI is planning to raise the loan amount to Rs 20 lakh approximately. The equation works like this; Rs 11 lakh (as per IIMA), plus Rs 1 lakh for a laptop/computer and Rs 3 lakh for additional expenses. Under the bank’s scheme, 95% of the fee amount can be availed as a loan.

Dena Bank, too, has similar schemes for students. “We offer educational loans up to Rs 10 lakh for higher studies within the country, and loan up to Rs 4 lakh does not require any collateral. The interest rate can be relaxed by 1% further, if the loan is being repaid during education,” says Dena Bank DGM TR Chawla.

The educational loan market has been steadily growing in India, since their introduction. For instance, in Gujarat alone, 31,000 educational loans have been given totalling Rs 711 crore. SBI alone contributes Rs 210.28 crore to this segment in the state, with Rs 28.20 crore accruing to scholar loans. Most of the educational loans can be repaid within 5-7 years.

Private banks do not want to be left behind either. “We not only offer educational loans for popular courses like MBA, but also offer loans for the preparation of CAT and SAP tests as well. The interest rate is around 13.5% and the loan amount can be up to Rs 20 lakh. Various factors are kept in mind while giving loans, but our focus is to lend money to the best students, opting for the best career opportunities,” says HDFC Bank business head of personal loan, and loans against securities and gold loan, Biju Pillai.

According to students, banks may be happy to provide loans to IIM aspirants. “The rate of interest is very high and most students can repay their fees in a year or two, looking at the kind of hefty packages they get. Compared to international B-schools, a $1,50,000 education at Harvard or Stanford is much more difficult to pay off,” says Aastha Sahdev, another IIM aspirant.

The data obsession

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Having studied in a B-school some 20 years ago, it is difficult to figure out what exactly one learnt there, and even more, to separate out what was missing. Anyway, the grades we got showed little of what they were trying to teach was going in our heads.

On a serious note, a lot of what is taught at B-school is black and white — theories, frameworks, templates and so on. What’s clearly missing are the shades of grey. I see many B-school graduates obsessed with data. Often, while they wait for perfect data, the decision moment has passed.

A lot in life is about deciding in real time with imperfect data — something that B-schools never teach. B-schools also have a huge assumption that competition is rational and logical, and will react to the same economic motives, the way you do — again something that real life teaches you is not always the case.

The biggest piece in B-school is about the emphasis on numbers and hard analysis; the importance of soft skills is often downplayed. The piece about teams and dealing with people is relatively less focused than what should be.

More important, most of what they teach in B-school is about marginal efficiencies — about making the widget better by squeezing all that can be made better. It is not about making a radically new widget itself. So creating or opening up a new market is hardly what you will hope to do based on B-school lessons.

To be fair, while I have pointed out what’s lacking in B-schools, let me also focus on what they help students with.

First, they provide a good opportunity for students to compete under pressure and to be exposed to different subjects — from human resource to organisational behaviour, economics to quantitative analysis, accounts to finance, and so on. It would be hard to find anyone exposed to such a range before B-school education.

Second, B-school creates a rational framework for analysis, whether of a plan or a post-mortem of performance. A lot of intuition and gut feel when it comes to real data, is stripped off to enable a non-emotional view — even if it can’t teach you to paint, it can teach you to figure how to get the best value for your painting!

R Subramanian graduated from IIM, Ahmedabad in 1989

B-Schools turn venture capitalists

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Not all business school (B-school) students want to work in someone else’s company. Many want to be their own boss. So, B-schools are pitching-in to make it all happen.

Every year, a handful of B-school students look to start their own businesses. But money is always an issue. Now, it seems B-school graduates may find the cash right in their backyards.

Take Jamshedpur-based Xavier Labour Resource Institute (XLRI). For the first time, the institute has pumped in Rs 3 lakh of its own money for a venture by six students. Then, there’s the Delhi-based Faculty of Management Studies, which is in talks with four angel investors. Out of the seven venture capitalists, deals with three have already been closed. Indian School of Business in Hyderabad has also wrapped up two deals for its students.

“Companies are forthcoming but details have to be worked out. At present, we have talked to about three companies and are at various stages of discussion. Next year, we will talk to not just venture capitalists but also for scholarships,” Rammohan Rao, Dean, ISB.

It gets better for students with an entrepreneurial spirit. Not just money for business ventures, but scholarships to help repay those education loans as well.

With B-schools providing assistance at various levels, it’s getting easier for graduating students to take the entrepreneurial plunge.

XLRI Jamshedpur gets 100 top-level placement offers

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KOLKATA: XLRI Jamshedpur’s lateral placements have ended on a high note with about a 100 offers made in varied profiles like finance, consultancy, operations, marketing and human resources for senior-level management roles.

The highest package offered was Rs 22 lakh annually, while the average package was Rs 15 lakh a year.

The financial services domain was represented by Barclays, Lehman Brothers, Standard Chartered, JM Financial, Centrum, among many others who made offers for investment banking, treasury sales, trading, product structuring, wholesale banking, relationship management and M&A advisory.

Consulting firms too, thronged the campus, offering students the roles of senior level consultants. Ernst and Young, Hewitt, PricewaterhouseCoopers, Mercer, KPMG, TSMG, Capgemini were the leaders in the pack.

The laterals process also saw a marked increase in the number of general management offers made by Indian business houses, including the Birla group, Hindujas, Essar, L&T and RPG. The Al Ghanim group offered international roles. The technology sector was represented by IBM, Cognizant, Infosys, HCL, Wipro, and the offers ranged from business development to global sales to project management. Infosys offered students fast track programs which would fetch packages of $1,00,000 a year into the job.

Professor Uday Damodaran, the chairperson of the placement committee said in a release, “The large number of high quality offers in niche areas reinforces the fact that XLRI is the preferred campus for recruitment by corporates.”

Excellence in Indian B-schools

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India currently has around 1,300 and more business schools (B-schools) approved by All India Council for Technical Education (AICTE) as the management education movement is nearing its fifth decade. Yet not a single school happens to be among the top 50 in any international rankings.

Of the many B-school rankings conducted in India every year, parameters stressed are infrastructure, education process, management development programmes, academic programmes, social responsibility, placement and industry interface. Even the best of the B-schools including IIMs, excelling in many of these parameters, today have a shortage of faculty and lack in research. Quality, distinctly, is something that the B-schools have to focus on in order to measure up to their peers in the west. Accreditation of B-schools is one way of ensuring quality. The accreditation principles are based on best practices in business education, maximising value addition.

These principles promote excellence in business education focusing on the value chain. Institutions must achieve and demonstrate an acceptable level of performance consistent with their mission, while satisfying defined standards. The processes used to strengthen curricula, develop faculty, improve instruction, and enhance intellectual activity determine the direction of improvement.

National Assessment & Accreditation Council (NAAC), an autonomous body set up by government in 1994, is one of the two agencies providing accreditation. National Board of Accreditation (NBA) constituted by the All India Council for Technical Education (AICTE), is the other body extending accreditation to institutions. While the purpose of the two agencies is to ensure quality, their present framework focus more on the input side requiring the institutions to comply with the minimum requirements necessary for teaching-learning process.

The participation level for accreditation must increase. Internationally, the Association to Advance Collegiate Schools of Business (AACSB), founded in 1916, grants accreditation for undergraduate and graduate business administration and accounting programmes. As of July 2007, 551 member institutions hold AACSB business accreditation and 94 accreditation council members are outside of the US.

The Association of MBAs (AMBA) has formally been accrediting MBA programmes since the early 1980s and currently accredits the MBA portfolios of over 130 schools worldwide. Its accreditation has developed into the internationally recognised standard of quality and good practice. International Assembly for Collegiate Business Accreditation (IACBE) accredits degree programmes in business and business-related fields.

The IACBE bases its accrediting process on principles, rather than standards. European Quality Improvement System (EQUIS), an international system of strategic audit and accreditation designed by Europeans (EFMD-The Management Development Network), uses the EQUAL (European Quality Link) model.

The design of the EQUAL model allows the EQUIS framework to cope with diversity and offer schools a powerful development tool. Indian B-schools should make serious efforts at meeting the accreditation norms. The institutions must develop and implement a strategic plan and it is expected that the strategic plan will include the outcomes assessment plan, reflecting on the learning objectives, strategies, action plans, etc. The business faculty should participate in the continuous review of the curricula and recommend changes and improvements as deemed appropriate.

Quality teaching should be supported by highly qualified faculty, capable of providing learning opportunities for students and who are active in professional and scholarly activities. Excellence in teaching is related to appropriate faculty workloads. The institution should encourage and reward appropriate professional development through research grants, sabbaticals,and so on.

The resources allocated to the institution, such as, IT labs and tools, library and hi-tech delivery tools should be sufficient to support all aspects of its activities. Internationalisation of business curriculum may come along with international experiences provided through the institution, other universities, or educational consortia; articulation agreements with institutions in other countries; or the promotion of student/faculty exchanges abroad.

As cultural, demographic, and technological shifts occur in society, the needs of business change. Individual business faculty members should be encouraged, supported, and rewarded for their creativity and for developing educational innovations related to course content and instruction. A few leading institutions in India and overseas campuses such as IMT Dubai have taken a lead in acquiring international accreditation for their programmes. Making accreditation integral to the system is essential, and not optional any more, to usher in world class excellence at Indian B-schools.