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Resources » Articles/Knowledge Sharing » Educational Loans »
Loan scheme for students by Indian Bank Association
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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 detailed below could be adopted by all Commercial Banks. The scheme provides broad guidelines to the banks for operational sing 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 customers friendly.
The scheme details are as under:
ELIGIBILITY CRITERIA:
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
Studies in India: (Indicative list)
* Graduation courses: BA, B.Com. B.Sc, etc.
* Post Graduation courses: Masters & PhD.
* Professional courses: Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc.
* Computer certificate courses of reputed institutes accredited to Dept. of Electronics or institutes affiliated to university.
* Courses like ICWA, CA, CFA etc.
* Courses conducted by IIM, IIT, IISc, XLRI. NIFT etc
* Courses offered in India by reputed foreign universities.
* Evening courses of approved institutes.
* Other courses leading to diploma/ degree etc. conducted by colleges/ universities approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
* Courses offered by National Institutes and other reputed private institutions. Banks may have the system of appraising other institution courses depending on future prospects/ recognition by user institutions.
Studies abroad:-
* Graduation: For job oriented professional/ technical courses
Offered by reputed universities.
* Post graduation: MCA, MBA, MS, etc.
* Courses conducted by CIMA- London, CPA in USA etc.
Expenses considered for loan:
* Fee payable to college/ school/ hostel.
* Examination/ Library/ Laboratory fee.
* Purchase of books/ equipments/ instruments/ uniforms.
* Caution deposit/ building fund/ refundable deposit supported by Institution bills/ receipts.
* Travel expenses/ passage money for studies abroad.
* Purchase of computers - essential for completion of the course.
* Any other expense required to complete the course - like study tours, project work, thesis, etc.
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.7.50 lacs.
- Studies abroad - Maximum Rs.15 lacs
MARGIN:
Up to Rs 4 lacs Nil
Above Rs. 4 lacs : Studies in India 5%
Studies Abroad 15%
- 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:
Up to Rs 4 lacs No security
Above Rs.4 lacs and up to R.s.7.5 lakhs Collateral in the form of a suitable third party guarantees. The bank may, at its discretion, waive third party guarantee if satisfied with the net-worth / means of parent who would be executing the document as "joint borrower".
Above Rs.7.5 lakhs Collateral security of suitable value or suitable third party guarantee along with the assignment of future income of the student for payment of installments.
Note:-
* The loan documents should be executed by the student and the parent/ guardian as joint-borrower.
* The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/ Units of UTI, NSC, KVP, LIC policy, gold, shares/ debentures, bank deposit in the name of student/ parent/ guardian or any other third party with suitable margin.
* Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on II charge basis provided it covers the required loan amount.
* In case the loan is given for purchase of computer the same to be hypothecated to the Bank.
Banks who wish to support highly meritorious/ deserving students without security may delegate such powers to a fairly higher level authority.
RATE OF INTEREST :
Up to Rs 4 lacs BPLR
Above Rs. 4 lacs BPLR + 1%
*Simple interest to be charged during the Repayment holiday/ Moratorium period.
* Penal interest @ 2% be charged for above Rs.4 lacs for the overdue amount and overdue period.
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 for 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 Installments (EMI) fixed.
* 1% interest concession may be provided for loaners if the interest is serviced during the study period when repayment holiday is specified for interest/ repayment under the scheme.
OTHER CONDITIONS:
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.
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.
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