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REVISED MODEL
EDUCATIONAL LOAN SCHEME FOR PURSUING
HIGHER STUDIES IN INDIA AND ABROAD
1.
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.
Based on recommendations made by
a Study Group, IBA had prepared
a Model Educational Loan Scheme
in the year 2001 which was advised
to banks for implementation by Reserve
Bank of India vide circular No.RPCD.PLNFS.BC.NO.83/06.12.05/2000-01
dated April 28, 2001 along with
certain modifications suggested
by the Government of India. In line
with the announcement made by the
Hon'ble Finance Minister in his
Budget Speech for the year 2004-05,
IBA had communicated certain changes
in the security norms applicable
to educational loans with limits
above Rs.4 lakhs and up to Rs. 7.5
lakhs.
We have been receiving enquiries
from members seeking clarifications
on the various provisions of the
scheme based on feedback received
from the branches. With a view to
ensure that the scheme is implemented
in letter and spirit, it was decided
to review the scheme and make modifications
in the scheme to facilitate smooth
operation at bank branches. Towards
this, a Working Group of General
Managers drawn from select banks
was constituted at IBA. This revised
model scheme has been prepared based
on the suggestions made by the Group.
2.
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.
3.
APPLICABILITY OF THE SCHEME:
The
scheme detailed below could be adopted
by all Commercial Banks. 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.
The
scheme details are as under :
4.
ELIGIBILITY CRITERIA :
4.1 Student eligibility:
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Should
be an Indian National
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Secured
admission to professional/
technical courses in India
or Abroad through Entrance
Test/ Merit Based Selection
process.
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4.2 Courses eligible
a. Studies in India: (Indicative
list)
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Graduation
courses : BA, B.Com., B.Sc.,
etc.
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Post
Graduation courses : Masters
& Phd.
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Professional courses : Engineering,
Medical, Agriculture, Veterinary,
Law, Dental, Management, Computer
etc.
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Computer
certificate courses of reputed
institutes accredited to Dept.
of Electronics or institutes
affiliated to university.
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Courses like ICWA, CA, CFA
etc.
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Courses conducted by IIM,
IIT, IISc, XLRI. NIFT etc.
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Regular
Degree/Diploma courses like
Aeronautical, pilot training,
shipping etc., approved
by Director General of Civil
Aviation/Shipping, if the
course is pursued in India.
In case the course is pursued
abroad, the Institute should
be recognized by the competent
local aviation/shipping
authority
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Courses
offered in India by reputed
foreign universities.
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Evening
courses of approved institutes.
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Other
courses leading to diploma/
degree etc. conducted by
colleges/ universities approved
by UGC/ Govt./ AICTE/ AIBMS/
ICMR etc
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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.
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Courses,
which are not covered under
the criteria mentioned above,
individual banks may take
a view to consider extending
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education
loan under the scheme taking
into account the future
prospects/recognition by
user institution.
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b.
Studies abroad :-
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Graduation : For job oriented
professional/ technical
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courses
offered by reputed universities.
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Post
graduation: MCA, MBA, MS,
etc.
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Courses
conducted by CIMA- London,
CPA in USA etc.
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4.3
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, subject to the
condition that the amount does
not exceed 10% of the total tuition
fees for the entire course.
- Travel
expenses/ passage money for studies
abroad.
- Purchase
of computers - essential for completion
of the course.
- Insurance
premium for student borrower
- Any
other expense required to complete
the course - like study tours,
project work, thesis, etc.
5.
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
6.
MARGIN :
| Upto
Rs 4 lacs |
Nil |
| Above
Rs. 4 lacs : Studies in India |
5% |
| Studies
Abroad |
15% |
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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.
7.
SECURITY :
| Upto
Rs 4 lacs |
Co-obligation
of parents.
No security
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| Above
Rs.4 lacs and upto Rs7.5 lakhs |
Co-obligation
of parents together with collateral
security in the form of suitable
third party guarantee. 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". |
| Above
Rs.7.5 lakhs |
Co-obligation
of parents together with tangible
collateral security of suitable
value, along with the assignment
of future income of the student
for payment of instalments |
Note:-
- The
loan documents should be executed
by both 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, life policy, gold, shares/mutual
fund units/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 second
charge basis provided it covers
the required loan amount.
- In
case the loan is given for purchase
of computer, the computer has
to be hypothecated to the Bank.
8.
RATE OF INTEREST :
| Upto
Rs 4 lacs |
BPLR |
| Above
Rs. 4 lacs |
BPLR
+ 1% |
Simple
interest to be charged during the
Repayment holiday/ Moratorium period.
Penal
interest to be charged as applicable
to individual banks.
9. 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.
10.
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.
11.
INSURANCE
Banks
may arrange for life insurance policy
on the students availing Educational
Loan. Individual Banks may work
out the modalities with insurance
companies
12.
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.
13.
PROCESSING CHARGES
No
processing/ upfront charges may
be collected on educational loans
for studies in India.
14.
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.)
15.
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
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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
Application
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.
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