Revised IBA Model Educational Loan Scheme for Pursuing Higher Education in India and abroad

The educational loan scheme is meant to provide need-based assistance to meritorious students in pursuing higher education.

Based on recommendations made by a Study Group, IBA had prepared a Model Educational Loan Scheme in the year 2001 that was advised to banks for implementation by Reserve Bank of India. The Model Scheme has been developed for the benefit of the member banks of the Association.  The salient aspects of the modifications incorporated in the revised Scheme / guidance: Admissions under Management quota for all courses including nursing courses kept outside the scope of the Scheme. While computing loan amount, scholarship/fee waiver, if any, available to the student would be taken into account. Students could submit loan applications either at bank branches near to the residence of parents or at bank branches near to the education institutions. However, KYC compliance has to be done by the branch nearest to the place of residence of parents. Further, after the loan is sanctioned, the student’s file could be transferred to the bank’s branch near to the institution for follow-up/monitoring. Part-time courses, research work and job oriented specialized programs could be considered based on merit and placement records at bank’s discretion. Banks could consider rating of educational institutions and students, as a tool for improving asset quality. It would be open for banks to offer differential interest rates based on rating of courses/institutions/students. Where institutions permit students to keep terms, in case of failure in one or two subjects, banks could disburse subsequent installments. Tracking of students after completion of course could be done in co-ordination with educational institutions. The Government is also proposing to establish a Credit Guarantee Fund Trust to administer and operate Credit Guarantee Fund Scheme for educational loans granted by banks upto Rs. 7.5 lakhs without any collateral security and third party guarantee. The details are being worked out.  The details of the new education loan scheme by IBA for Pursuing Higher Education in India and abroad  Student eligibility: The student should be an Indian National 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). However, entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, banks will have to adopt appropriate criteria based on employability and reputation of the institution concerned Courses eligible  For Studies in India: Approved courses leading to graduate/ post graduate degree and P G diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc. Courses like ICWA, CA, CFA etc. Courses conducted by IIMs, IITs, IISc, XLRI. NIFT,NID etc. egular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India. Approved courses offered in India by reputed foreign universities. The above list is indicative in nature. Banks may approve other job-oriented courses leading to technical/ professional degrees, postgraduate degrees/diplomas offered by recognized institutions under this scheme. Courses other than the above offered by reputed institutions may also be considered based on employability.  For 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. Degree/diploma courses like aeronautical, pilot training, shipping etc provided these are recognized by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad. Quantum of finance: Studies in India - Maximum upto Rs.10 lakhs. Studies Abroad - Maximum upto Rs.20 lakhs.  Banks may consider higher quantum of loan on course-to-course basis (eg: courses in IIMs, ISB etc). It may also be noted that even loans in excess of Rs. 10 lakhs qualify for interest subsidy under Central Sector Interest Subsidy Scheme for loans up to Rs. 10 lakhs. Expenses considered for loan:  i. Fee payable to college/ school/ hostel  ii. Examination/ Library/ Laboratory fee iii. Travel expenses/ passage money for studies abroad iv. Insurance premium for student borrower, if applicable v. Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts.  vi. Purchase of books/ equipments/ instruments/ uniforms vii. Purchase of computer at reasonable cost, if required for completion of the course viii. Any other expense required to complete the course - like study tours, project work, thesis, etc ix. While computing loan required, scholarships, fee waiver etc., if any available to the student borrower may be taken into account.  Margin:  Upto Rs. 4 lakhs: Nil Above Rs. 4 lakhs  • 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:  Upto Rs. 4 lakhs: Parents to be joint borrower(s). No security  Above Rs 4 lakhs and upto Rs. 7.5 lakhs: Besides the parent(s) executing the documents as joint borrower(s), collateral security in the form of suitable third party guarantee will be taken. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as joint borrower(s).  Above Rs. 7.5 lakhs:Parent(s) to be joint borrower(s). Tangible collateral security of suitable value acceptable to bank, along with the assignment of future income of the student for payment of instalments.  Rate of interest  Interest to be charged at rates linked to the Base rate as decided by individual banks. Simple interest to be charged during the study period and up to commencement of repayment.  Repayment  Course period + 1 year or 6 months after getting job, whichever is earlier. Repayment of the loan will be in equated monthly installments for periods as under:  For loans upto Rs. 7.5 lakhs - upto 10 years  For loans above Rs. 7.5 lakhs - upto 15 years