Revised Model Educational Loan Scheme for Pursuing Higher Studies in India and Abroad
- Prepared by Indian Bank's Association
Introduction:
Education is central to the Human Resources Development and empowerment in any country. National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives. While government endeavour to provide primary education to all on a universal basis, higher education is progressively moving into the domain of private sector. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area.
The scope of education has widened both in India and abroad covering new courses in diversified areas. Development of human capital is a national priority and it should be the endeavour of all that no deserving student is denied opportunity to pursue higher education for want of financial support. Loans for education should be seen as an investment for economic development and prosperity. Knowledge and information would be the driving force for economic growth in the coming years.
The Salient Features of the Scheme are as under:
| Item | Description | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Objectives of the Scheme | The Educational Loan Scheme outlined below aims at providing financial support from the banking system to deserving/ meritorious students for pursuing higher education in India and abroad. The main emphasis is that every meritorious student though poor is provided with an opportunity to pursue education with the financial support from the banking system with affordable terms and conditions. No deserving student is denied an opportunity to pursue higher education for want of financial support. | ||||||||
| Applicability of the Scheme | The scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank will have the discretion to make changes suiting to the convenience of the students/ parents to make it more customer friendly. | ||||||||
| Student eligibility: | Should be an Indian National. Secured admission to professional/ technical courses in India or Abroad through Entrance Test/ Merit Based Selection process. | ||||||||
| Courses eligible | a. Studies in India: (Indicative list)
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| Expenses considered for loan |
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| Quantum of Finance | Need based finance subject to repaying capacity of the parents/ students with margin and the following ceilings.
Studies in India - Maximum Rs.10.00 lacs. Studies abroad - Maximum Rs.20 lacs | ||||||||
| Margin |
Scholarship/ assistantship to be included in margin. Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis. | ||||||||
| Security |
Note:-
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| Rate of Interest |
Simple interest to be charged during the Repayment holiday/ Moratorium period. Penal interest to be charged as applicable to individual banks. | ||||||||
| Appraisal/ Sanction/ Disbursement | In the normal course, while appraising the loan the future income prospects of the student will be looked into. However, where required, the means of parent / guardian could also be taken into account to evaluate re-payment capability.
The loan to be sanctioned as per delegation of powers preferably by the Branch nearest to the place of residence of parents. No application for educational loan received should be rejected without the concurrence of the next higher authority. The loan to be disbursed in stages as per the requirement/ demand directly to the Institutions/ Vendors of books/ equipments/ instruments to the extent possible. | ||||||||
| Repayment | Repayment holiday/ Moratorium : Course period + 1 year or 6 months after getting job, whichever is earlier.
The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course. The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed. 1% interest concession may be provided for loanees if the interest is serviced during the study period when repayment holiday is specified for interest/ repayment under the scheme. | ||||||||
| Insurance | Banks may arrange for life insurance policy on the students availing Educational Loan. Individual Banks may work out the modalities with insurance companies | ||||||||
| Follow up/ Tracking | Banks to contact college/ university authorities to send the progress report to the bank at regular intervals in respect of students who have availed loans. In case of studies abroad, bank may obtain the Unique Identification Number (UIN)/Identity Card and note the same in the bank's records. | ||||||||
| Processing Charges | No processing/ upfront charges may be collected on educational loans for studies in India. | ||||||||
| Capability Certificate | Banks can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtained from applicant, if required. Some of the foreign universities require the students to submit a certificate from their bankers about the sponsors' solvency/ financial capability, with a view to ensure that the sponsors of the students going abroad for higher studies are capable of meeting the expenses till completion of studies.) | ||||||||
| Other Conditions | a. Meritorious Students
Banks which wish to support highly and exceptionally meritorious/ deserving students without security may delegate such powers to a fairly higher level authority. b. Multiple Loans In case of receipt of application for more than one loan for student borrower from a family, the 'family' as a unit has to be taken into account for considering the loan and security taken in relation to the total quantum of finance disbursed, subject to margin and repaying capacity of the parent/student. c. Minimum Age There is no specific restriction with regard to the age of the student to be eligible for education loan. d. Change of Address In cases of student staying with parents and where such parents have transferable jobs or there is change in address, the bank may provide in the system of noting the "address for correspondence" for tracking purpose. e. Top up loans Banks may consider top up loans to students pursuing further studies within the overall eligibility limit, with appropriate re-schedulement, subject to taking required security. f. Co-obligator The co-obligator should be parent(s)/guardian of the student borrower. In case of married person, co-obligator can be either spouse or the parent(s)/parents-in-law. No Due Certificate No due certificate need not be insisted upon as a pre-condition for considering educational loan. However, banks may obtain a declaration/ an affidavit confirming that no loans are availed from other banks. Disposal of Applications Loan applications have to be disposed of within a period of 15 days to 1 month, but not exceeding the time norms stipulated for disposing of loan applications under priority sector lending. Flexibility in terms In order to bring flexibility in terms like eligibility, margin, security norms, banks may consider relaxation in the norms on a case-to-case basis delegating the powers to a fairly higher level authority. | ||||||||
| Tax benefits | Deduction is available under section 80E of Income Tax Act for any amount paid in the previous year by an assessee out of his income chargeable to tax, by way of interest on loan taken by him from any financial institution or any approved charitable institution for the purpose of pursuing his higher education or for the purpose of higher education of his relative (spouse and children). | ||||||||
| For further clarifications/ details, please visitIBA website. | |||||||||