Lok Sabha Question No. 1275 (UNSTARRED), answered on 2019-02-11
Subject: Educational Loans
Ministry: HUMAN RESOURCE DEVELOPMENT
Asked by: N.K. PREMACHANDRAN

## GOVERNMENT OF INDIA MINISTRY OF HUMAN RESOURCE DEVELOPMENT DEPARTMENT OF HIGHER EDUCATION

## LOK SABHA

## UNSTARRED QUESTION No. 1275 TO BE ANSWERED ON 11 th  FEBRUARY, 2019

## Educational Loans

## 1275. SHRI N.K. PREMACHANDRAN:

## Will the Minister of HUMAN RESOURCE DEVELOPMENT be pleased to state:

- (a) the details of the criteria fixed by the Government for educational loans;
- (b) the details of interest fixed by the Government for education loans;
- (c) whether the banks are liable to follow the guidelines and interest rate fixed for educational loans as agreed with the Government;
- (d) if so, the details thereof;
- (e) whether  it  has  come  to  the  notice  of  the  Government  that  the  banks  are  demanding  for security and surety for educational loans;
- (f) if so, the details thereof;
- (g) whether it has come to the notice of the Government that the banks are levying high rate of interest for the educational loans as same as to commercial loans; and
- (h) if so, the action taken by the Government to reduce the rate of interest of educational loans?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF HUMAN RESOURCE DEVELOPMENT (Dr. Satya Pal Singh)

(a)  to  (h)    All  banks  follow  Indian  Banks'  Association  (IBA)  Model  Education  Loan  Scheme  and grant  education  loan  as  per  instructions  issued  by  the  Government/Reserve  Bank  of  India/  Indian Banks'  Association.  The  objective  of  the  scheme  is  to  provide  financial  support  from  the  banking system to the meritorious students for pursuing higher studies in India and abroad. Model Education Loan Scheme provides for:

- (i) Maximum education  loan  up  to  Rs  10  lakh  for  studies  in  India  and  Rs  20  lakh  for studies abroad.
- (ii) All  banks  are  mandated  not  to  accept  collateral  security  or  margin,  for  educational loans   upto Rs 4 lakh and for loan above Rs 4 lakh and upto Rs 7.5 lakh, if the loan is covered under Credit Guarantee Fund for Education Loan Scheme.
- (iii) For loan above Rs 4 lakh, 5% margin is required for studies in India and 15% margin for studies abroad.
- (iv) Repayment period of 15 years besides repayment holiday/ moratorium period (course period plus one year).
- (v) Banks  may  also  provide  additional  moratorium  period  up  to  six  months  at  a  time, taking into account, spells of unemployment/ under-employment, during the tenure of the loan.
- (vi) Moratorium is provided for the incubation period if the student wants to take up a startup venture after graduation.

For a student to be eligible for education loan, he/she should be an Indian National and should have secured  admission  to  a  higher  education  course  in  recognized  institutions  in  India  or  Abroad through  Entrance  Test/  Merit  Based  Selection  process  after  completion  of  HSC  (10  plus  2  or equivalent).  Banks  may  also  approve  other  job  oriented  courses  leading  to  technical/  professional degrees,  post  graduate  degrees/diplomas  offered  by  recognized  institutions  under  this  scheme. Courses other than the above offered by reputed institutions can also be considered on the basis of employability.

As  per  the  directions  of  Reserve  Bank  of  India,  with  effect  from  1st  July,  2010,  banks  are required  to  price  their  loan  products  including  education  loans  linked  with  the  base  rates  (now marginal  Cost  of  Lending  Rates-MCLR)  approved  by  their  respective  Boards.  Banks  are  not permitted  to  resort  to  any  lending  below  the  Base  Rates/  MCLR.  Accordingly,  interest  rates  on education loans are decided by the bank concerned as per their approved policy. Further, the Model Educational Loan Scheme of IBA provides for certain concessions on educational loans which interalia  includes,  (i)  simple  interest  rate  during  the  study  period  and  up  to  the  commencement  of  the repayment, (ii) 1% interest concession if interest is serviced during the study period and subsequent moratorium period prior to the commencement of the repayment, (iii) 0.5% concession in the interest rate  to the girl students, (iv) rebate in Income tax to the extent of interest paid on education loan.

Further, the Government also provides interest subsidy on education loans for higher education to the students from the economically weaker sections of the society, under the following schemes:

(i) Central  Sector  Interest  Subsidy  Scheme  (CSIS):  Under  the  Scheme,  full  interest  subsidy  is provided during the moratorium period (course period plus one year), on the educational loan up to Rs. 7.5 lakh, taken by the students having annual parental income up to Rs.4.5 lakh.  In the last three years, Rs. 4,742.84 crores have  been disbursed towards interest subsidy in 33.84 lakh accounts.  In the current financial year Rs. 2,150 crore has been allocated for the scheme.

(ii) Dr. Ambedkar Scheme of Interest Subsidy on Educational Loans for Overseas Studies:

Interest subsidy  is  provided  to  the  meritorious  Other  Backward  Classes  (OBC)  and Economically Backward Classes (EBC) students, so as to provide them opportunities to pursue higher education abroad in the field of Arts, Engineering, Medical and Agriculture. The income ceiling is Rs. 8 lakh per annum for OBCs and Rs. 2.5 lakh per annum for EBCs. 50% of the outlay is earmarked for girl  students.  In  the  last  two  years,  Rs.  22.77  crores  have  been      disbursed        towards        interest subsidy benefitting  2820  students.

(iii) Padho Pardesh Scheme:   Under the scheme Interest Subsidy is provided on educational loan on  overseas  studies  for  the  meritorious  and  economically  weaker  students  belonging  to  Minority Communities. The income ceiling is Rs. 6.00 Lac per annum. In the last three years, Rs. 43.22 crores have been disbursed towards interest subsidy benefitting 4596 students.

Complaints regarding education loans, as and when received by the Government, are taken up with the concerned banks for corrective action.

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