Educational Loans

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RBI guidelines stipulate that every meritorious student should be given access to better education. Accordingly banks are now offering educational loans for courses in India and abroad. The only eligibility is that the student should have secured admission through an entrance test or other such selection exams. The amount of loan a student can take is Rs 7.5 lakh for education in India and Rs 13 lakhs for education abroad. University fees, caution deposit, library fee among others become eligible for a loan advance. This type of loan has to be repaid within 1 year after the conclusion of the course.

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Educational Loans

  1. 1. Educational Loans Introduction and Eligibility Expenses Considered for and Amount of Loan Margin and Security Documentation Interest Rate and Sanction Repayment Follow up charges, Types of Advance Other Conditions, Capability CertificateEducational Loans Retail Banking Chapter 12
  2. 2. Introduction & Eligibility As per the suggestion of R.B.I. that the everymeritorious student should get facility of education withfinancial support even though he /she is poor. Banks offer loansfor following different courses in India or abroad. The eligibility of student is should be Indian. Securedadmission through entrance test/selection process. There is noneed to have secured a minimum qualifying mark.Educational Loans Retail Banking Chapter 12
  3. 3. Introduction & Eligibility Banks offer loans for following different courses in India or abroad. Courses ICWA, CA, CFA BA, Bcom, Bsc. Courses conducted by Professional courses IIM, IIT, IISc, XLRI Evening courses of approved by School education plus 2 stages Institutes Courses offered in India by Courses approved by reputed foreign universities UGC/AICTE/Govt. Post graduation courses Computer certificate coursesEducational Loans Retail Banking Chapter 12
  4. 4. Expenses Considered for and Amount of LoanThe expenses considered for loan can be elaborated by chart.The amount of loan is Rs. 7.50 lakhs in India and Rs. 15.00 lakhs forabroad. Purchase of books equipments etc. Any other expenses like study tour, Refundable/ project work etc. Caution Deposit Expenses considered Travel expenses, for loan Examination / money Library fees for studies abroad Purchase of computer if it is essential for Collage/university fees completion of course Educational Loans Retail Banking Chapter 12
  5. 5. Margin and Security Loans up to Rs. 4 lakhs required no margin. But aboveRs. 4 lakhs the same should be 5% for studies in India and 15%for studies abroad. The scholarship/assistantship to be includedin margin. It may be brought year to year basis as and whendisbursements are made on a pro-rata basis. As the case with margin the security is also not requiredup to Rs. 4.00 lakhs. Above that a collateral security of suitablevalue or co-obligation of parent along with assignment of futureincome should be obtained.Educational Loans Retail Banking Chapter 12
  6. 6. Documentation The documents has to be executed for this type or loanfrom both parents and student. In case of security it can be inthe form of land/building/Government securities/units of UTI,NSC, KUP, gold etc. in case of loan is to be provided forpurchase of loan the same should be hypothecated. Bank whowish to support highly deserving/meritorious students withoutsecurity may delegate such powers to a fairly higher levelauthority.Educational Loans Retail Banking Chapter 12
  7. 7. Interest Rate and Sanction Up to Rs. 4 lakhs the interest rate not more than PLR (Prime Lending Rate). Above Rs. 4.00 lakhs the rate of PLR+1%. The amount of interest is debited to account quarterly/half yearly on simple basis during the moratorium period. Penal interest @ 2% may be charged for loans above Rs. 4.00 lakhs for the overdue period and amount. The loan to be sanctioned preferably by the branch nearest to the place of domicile.Educational Loans Retail Banking Chapter 12
  8. 8. Repayment For this type of loan, moratorium period or the repayment holiday period is course period + 1 year or 6 months after getting job whichever is earlier. The loan should be repaid in 5 to 7 years after commencement of repayment. If student unable to complete the course, the additional extension of 2 years may be provided. If student still unable to complete the course for the reason beyond his control, sanctioning authority may be deemed necessary. The accrued interest during holiday period is added to the principal and repayment in (EMI) fixed. 1-2% interest concession may be provided for loanees if the interest amount is serviced during moratorium period.Educational Loans Retail Banking Chapter 12
  9. 9. Follow up charges, Types of Advance Bank may contact collage/university authorities to send the progress report at regular intervals in respect of student who have availed loans no processing fee/ up front charges should be collected on educational loans. This advance is considered as priority sector advance. Such loan application should be disposed off within a period of 15 days to 1 month. In order to bring flexibility, banks may consider relaxation in norms on case to case basis depending the powers to fairly higher level authority.Educational Loans Retail Banking Chapter 12
  10. 10. Other Conditions, Capability Certificate N.D.C. i.e. No Due Certificate need to be insisted upon as a pre-condition for this type of loan. However banks may obtain a declaration/an affidavit confirming that no loans are availed from other banks. The loan processing limit should be as stipulated for disposing of priority sector lending. Banks can also issue the capability certificate for student going abroad for higher studies. For this the financial and other documents may be obtained from applicant, if required.Educational Loans Retail Banking Chapter 12
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