(Photo credit: Rakesh Thykandi)
When 120 applicants to the much talked about 5-year Integrated Programme in Management (IPM) at the Indian Institute of Management (IIM), Indore received their offer letters by email on October 12, they were overjoyed. But along with the offer, the institute also sent them a separate document stating that they would have to submit an An irrevocable bank guarantee of the amount equivalent to the balance fee of Rs 18 Lakh by November 12, the date of registration. For the applicants, the next few days were spent running around, speaking to banks and IIM-I officials to get the guarantee. No bank was however assuring them of the guarantee without Rs 18 lakh in fixed deposit or even Rs 25 lakh as collateral.
The students were at their wits’ end, after all the futile efforts at getting the bank guarantee when late last evening they received an email from the IIM-I admissions chairperson announcing that at the request of the students parents, the institute had decided to waive the stumbling bank guarantee clause.
Although the immediate requirement of the bank guarantee has been done away with, many students will still need a loan to pursue this course. Prashant Bhonsle, the country head of Credila Financial Services, an HDFC Ltd company that specialises in student loans, clarified the banks’ version to PaGaLGuY, “The banks are unsure about how the course will pan out in the next five years and whether it will be accepted by the industry in terms of employment offers, he said.
According to Bhonsle, although the bank does not usually ask for collateral for regular IIM courses like the post graduate programme (PGP) in management or PGP Executive course, it will need a collateral for the new course, unless the customer has a sustained good financial relationship with the said bank previously, thereby gaining the bank’s trust.
“Many courses do not require a collateral because the students already come with some experience so it is easier for the lender to take a call about their employability,” added Bhonsle. “How the industry would take this integrated course which is for freshers after XII standard once the first batch passes out five years from now, can only be concluded once it happens. There is no data or benchmark available. That is why the banks are asking for collateral. Also, the tenure of the course makes a difference. In this course, any scope of repayment takes place only after 6 years.”
The applicants that PaGaLGuY spoke to said that they were finding it difficult to meet the conditions that the banks had laid down for approval of a bank guarantee and did not have that kind of ready cash or assets to provide as collateral. Suresh Kumar (name changed), a prospective student of the IPM felt that the course, because of the clause of the bank guarantee, was beyond the reach of the average middle class family. “Most of us are middle class people and rely on bank loans.
The stumbling bank guarantee clause
Things came to such a head, that Kumar even considered backing out of taking admission. “I would not have joined the course if they hadnt removed the bank guarantee clause in their requirements, ” he said.
Despite repeated attempts by PaGaLGuY to get in touch with the IIM Indore officials for their version, none were available for comment.
When asked why the institute would have put up such a clause, Kumar said that he understood the bank’s fears that The institute is not sure whether the students will stay or leave the course after three years as it is not recognized by the HRD ministry as a regular three year Bachelor’s degree.
Even if the bank guarantee-related emergency has been averted, there are other issues with the 5-year integrated course that may take more time to be solved. The programme, which will comprise a mix of subjects ranging from maths and science to history, civilizations, languages and soft skills, aims to prepare students for a career in management with a social sciences grounding. Earlier this week, a Times of India story reported that admitted students were astounded by a letter from director N Ravichandran asking students to pursue a graduation degree by distance mode on the side.
In the September 19 letter addressed to the shortlisted candidates, director N Ravichandran had asked the shortlisted candidates to take an informed decision to join the course. He made it clear that since IIM-I was a public institution founded by the Government of India under the Societies act, it is not empowered to offer degrees after completion of any academic programme.
The director went on to say that the institute could only provide an integrated diploma in management and that for the applicants to this programme, pursuing a degree in the first three years by distance education mode while they are on IIM Indore campus is a reality. The responsibility to enroll in this parallel course lay with the applicants joining the course, according to the letter.
For now, the students are optimistic despite the controversies surrounding the course. We are keen to take admission and are fine with getting a diploma, said Kumar. The September 19 letter also assured students that the institute “is exploring many options of accrediting IPM equivalent to an MBA programme with some reputed universities in India” so that students could get a degree.”