Lok Sabha Question No. 3874 (UNSTARRED), answered on 2026-03-16
Subject: Guidelines for Education Loans
Ministry: FINANCE
Asked by: Shri Selvam G, Shri C N Annadurai

## 3874. SHRI C N ANNADURAI

## SHRI SELVAM G:

Will the Minister of FINANCE be pleased to state:

- (a) whether  the  Government  has  undertaken  a  State-specific  review  of  the  adoption  and  onground implementation of the Model Education Loan Scheme (MELS), 2022 by Scheduled Commercial Banks in Tamil Nadu, if so, the details thereof;
- (b) whether uniform guidelines are being enforced across bank branches, if so, the details thereof;
- (c) whether  a  large  number  of  eligible  Scheduled  Caste  and  Scheduled  Tribe  students  in  the  State continue  to  face  loan  denials,  delays  and  informal  collateral  or  guarantor  demands,  leading  to deferment or discontinuation of higher education and if so, the corrective steps taken thereon;
- (d) the number of SC beneficiaries assisted through education loans by the National Scheduled Castes Finance and Development Corporation in Tamil Nadu and the funds released and utilised during the last three years; and
- (e) whether  Government  proposes  mandatory  monitoring,  grievance-redressal  mechanisms  and targeted awareness drives to address regional disparities and ensure equitable access to education finance for SC/ST students in Tamil Nadu, if so, the details thereof?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SH. PANKAJ CHAUDHARY)

(a) to (c) No such state-specific review has been conducted. However, overall performance of Public Sector Banks (PSBs) with respect to education loans is being reviewed periodically by this Department. Further, all Scheduled Commercial Banks (SCBs) have been advised by Reserve Bank of India (RBI) vide circular  RPCD.PLNFS.BC.NO.83/06.12.05/2000-01  dated  April  28,  2001  to  adopt  Model Education Loan Scheme (MELS), formulated by Indian Banks' Association (IBA), 2022 (last amended on 23.6.2025). This scheme is available for all sections of the society including SC/ST students. The main features of the scheme are as under:

- The scheme provides need-based education loan.
- No collateral security or third-party guarantee is required for loans amount up to ₹ 7.50 lakhs, provided they are eligible for Central Sector Interest Subsidy Scheme (CSIS)/ Credit Guarantee Fund Scheme for Education loan (CGFSEL).
- No Margin for loans up to ₹ 4 lakhs.
- Moratorium period is allowed upto study period plus one year in all cases.
- Repayment period (after moratorium) is available upto 15 years for all loans.

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 3874

ANSWERED ON MONDAY, 16 th  MARCH, 2026/ 25 PHALGUNA, 1947 (SAKA)

## Guidelines for Education Loans

Further, RBI vide circular RPCD.SME&NFS.BC.No. 69/06.12.05 /2009-10 dated April 12, 2010, on Collateral Free Loans - Educational Loan Scheme, has advised that banks must not, mandatorily, obtain collateral security in the case of educational loans upto ₹ 4 lakh.

Moreover,  RBI vide the  Master  Directions  FIDD.CO.PSD.BC.13/04.09.001/2024-25  dated  March 24,2025 has prescribed Priority Sector Lending for all Commercial Banks including Regional Rural Banks  (RRBs),  Small  Finance  Banks,  Local  Area  Banks  and  Primary  (Urban)  Co-operative  Banks (UCBs) other than Salary Earners' Banks. Within the overall target for priority sector lending, a subtarget of 12 % (15% for RRBs) has been fixed for weaker sections, which includes Scheduled Tribes (STs).

In addition to the above, banks have established internal monitoring systems and grievance redressal mechanisms to address issues related to processing of loan applications in order to ensure timely decision on loan applications.

(d)  As  informed  by  National  Scheduled  Castes  Finance  and  Development  Corporation  (NSFDC), education loans amounting to ₹ 6.36 crores have been disbursed to 284 SC beneficiaries by NSFDC in Tamil Nadu during the last three years.

(e) RBI's Master Circular on Credit facilities to the SCs/STs dated April 01, 2025, inter alia, includes the following provisions:

- i. Banks must assist SC/ ST borrowers with applications and conduct regular awareness campaigns on schemes to improve credit access and financial inclusion.
- ii. Rejection of SC/ STs' loan applications under government programmes should be done at the next higher level instead of at the branch level and reasons of rejection should be clearly indicated to ensure transparency and accountability.
- iii. Banks must establish a dedicated monitoring cell at the head office to oversee SC/ ST lending, conduct quarterly reviews, and report major variation, if any to the Board.

Further, as informed by State Level Bankers' Committee (SLBC), Tamil Nadu, education loan related issues,  including  sanctions  are  periodically  reviewed  in  SLBC  meetings.  Moreover,  Lead  District Managers organize multiple educational loan campaigns in the respective district at various colleges or at a designated venue to create greater awareness among students.

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