Indian
Banks’ Association (IBA) had revised the Educational Loan Scheme in the
month of August 2011 (IBA Circular No: CE/149 dated 20.08.2011), and on
implementation of the same all member banks had started following those
guidelines.
Recently,
in the month of May 2012 (Circular No: CE/210 dated 31.05.2012) in
consultation with major educational Institutions in India, IBA has made certain modifications in the Educational Loan Scheme.
Major Changes made in Educational Loan Scheme in the month May 2012 are:
· Admissions under Management quota for all courses including nursing courses kept outside the scope of the Scheme.
· Students
could submit loan applications either at bank branches near to the
residence of parents or at bank branches near to the education
institutions.
· Part-time
courses, research work and job oriented specialized programs could be
considered based on merit and placement records at bank’s discretion.
· 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 full text of Revied Educational Loan Scheme is given below
REVISED MODEL EDUCATIONAL LOAN SCHEME FOR PURSUING HIGHER EDUCATION IN INDIA AND ABROAD
ELIGIBILITY CRITERIA:
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:
Studies in India: (Indicative list)
· 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.
· 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.
· Approved courses offered in India by reputed foreign universities.
Note:
· The
above list is indicative in nature. Banks may 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 may also be considered on the basis of employability.
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.
Expenses considered for loan :
1. Fee payable to college/ school/ hostel*
2. Examination/ Library/ Laboratory fee
3. Travel expenses/ passage money for studies abroad
4. Insurance premium for student borrower, if applicable
5. Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts. **
6. Purchase of books/ equipments/ instruments/ uniforms***
7. Purchase of computer at reasonable cost, if required for completion of the course***
8. Any other expense required to complete the course – like study tours, project work, thesis, etc***
9. While
computing loan required, scholarships, fee waiver etc., if any
available to the student borrower may be taken into account.
Notes:
*
Reasonable lodging and boarding charges will be considered in case
the student chooses / is required to opt for outside accommodation.
**
These expenses could be considered subject to the condition that the
amount does not exceed 10% of the total tuition fees for the entire
course.
***
It is likely that expenditure under Item Nos. vi, vii & viii above
may not be available in the schedule of fees and charges prescribed by
the college authorities. Therefore, a realistic assessment may be made
of the requirement under these heads. However, the maximum expenses
included under vi, vii & viii may be capped at 20% of the total
tuition fees payable for completion of the course.
QUANTUM OF FINANCE:
Need
based finance to meet the expenses worked out as per para 4.3 above
will be considered taking in to account margins as per para 6 subject to
the following ceilings:
- Studies in India - Maximum upto ₹ 10 lakhs.
- Studies Abroad - Maximum upto ₹ 20 lakhs.
Note:
The ceilings fixed for studies in India
and Abroad correspond to the limits fixed by the RBI for treatment as
priority sector lending. 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 ₹ 10 lakhs qualify for interest subsidy under Central Sector Interest Subsidy Scheme for loans up to ₹ 10 lakhs.
Margin:
Upto 4 lakhs
|
Nil
|
Above 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:
Loan amount
|
Conditions
|
Upto 4 lakhs
|
No security. Parents to be joint borrower(s)
|
Above 4 lakhs and up to 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 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
|
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 / any other third party or any other tangible security
acceptable to the bank 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
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.
Note:
Servicing of interest during study period and the moratorium period
till commencement of repayment is optional for students. Accrued
interest will be added to the principal amount borrowed while fixing EMI
for repayment.
· APPRAISAL / SANCTION/ DISBURSEMENT :
· Applications
will be received either directly at bank branches or through on-line
mode. Upon receipt of application, standard acknowledgement giving a
reference number will be issued. The acknowledgement will contain
contact details of the bank official who, could be contacted in case of
delay in disposal of application.
· Normally,
sanction/rejection will be communicated within 15 days of receipt duly
completed application with supporting documents.
· In the normal course, while appraising the loan, the future income prospect of the student only will be looked into.
· Rejection
of loan application, if any, shall be done with the concurrence of the
controlling authority of the branch concerned and conveyed to the
student stating reason for rejection.
· Students
may submit their loan applications either at the bank branches near to
the residence of parents or to the educational institution. However,
after the loan is sanctioned, the cases be transferred to the bank
branch near to the institution for follow up with student / institution.
The KYC compliance for the purpose has to be done by the branch
nearest to the residence of parents.
· The
loan to be disbursed in stages as per the requirement/ demand directly
to the Institutions/ Vendors of equipments/ instruments to the extent
possible.
REPAYMENT:
Repayment holiday/Moratorium
|
Course period + 1 year or 6 months after getting job, whichever is earlier.
|
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. In case the student discontinues the course midway,
appropriate repayment schedule will be worked out by the bank in
consultation with the student/parent
· 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 by the bank, if interest is
serviced during the study period and subsequent moratorium
period prior to commencement of repayment. Repayment of the loan will
be in equated monthly instalments for periods as under:
For loans upto –7.5 lakhs – upto 10 years
For loans above–7.5 lakhs – upto 15 years
· While
EMI based repayment is the generally accepted practice, many times the
salary levels at the start of the career may not facilitate comfortable
payment of EMI in certain cases (e.g. professionals like Doctors).
Telescoping of repayment with stepped up instalments with passage of
time may be considered in such cases.
Note: No prepayment penalty will be levied for prepayment of loan any time during the repayment period.
INSURANCE
Banks
may, with the consent of the student, arrange for life insurance policy
on the students availing Education Loan. Individual Banks may work out
the modalities with insurance companies.
FOLLOW UP/MONITORING:
Banks
to contact college / university authorities to obtain progress report
on the student at regular intervals in respect of those who have availed
loans. In case of studies abroad, bank may obtain the SSN/Unique
Identification Number (UIN)/Identity Card and note the same in the
bank’s records. The UID number issued by UIDIA may also be captured in
bank’s system as and when available. Banks to enter into Memorandum of
Understanding (MoU) with the educational institutions to provide the
educational loans to the students. There should be an annual review of
the asset quality of educational loans between banks and educational
institution.
PROCESSING CHARGES :
No
processing / upfront charges may be levied on loans sanctioned under
the scheme. (Banks may charge processing fee for considering loans for
studies abroad. The fee would however, be refunded upon the student
taking up the course)
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.)
OTHER CONDITIONS:
Sanction of loan to more than one child from the same family
Existence
of an earlier education loan to the brother(s) and/or sister(s) will
not affect the eligibility of another meritorious student from the same
family obtaining education loan as per this scheme from the bank.
Minimum Age:
There
is no specific restriction with regard to the age of the student to be
eligible for education loan. However, if the student was a minor while
the parent executed
documents for the loan, the bank will obtain a letter of ratification from him/her upon attaining majority.
Top up loans:
Banks
may consider top up loans to students pursuing further studies within
the overall eligibility limit, if such further studies are commenced
during the moratorium period of the first loan. The repayment of the
loan will commence after the completion of the second course and further
moratorium period, as provided under the scheme.
Joint Borrower:
The
joint borrower should normally be parent(s)/guardian of the student
borrower. In case of a married person, joint borrower can be either
spouse or the parent(s)/parents-in-law.
No Due Certificate:
No
due certificate will not be insisted upon as a pre-condition for
considering education loan. However, banks may obtain a declaration/ an
affidavit confirming that no loans are availed from other banks.
Disposal of loan application:
Loan
applications have to be disposed of in the normal course 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.
