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Government encourages education loan


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education loan

Published in: News & Politics
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Government encourages education loan

  1. 1. Government plans 1000 cr fund to help banks cover defaults Monica sharma MBA I year
  2. 2. Education loan  Interest rates from 13-14%  Lower by 0.5% for girls  Started in 1995 by SBI followed by other banks  Most useful in engineering, medical and management education  Tax exemption against payment of interest for self or spouse or children under section 80(e) of Income Tax Act  Least lucrative loan for banks due to higher rate of defaults
  3. 3. Current scenario  Currently the banks have an outstanding loan of about 63,500 crore  5-10% of education loan portfolios turned bad  Most defaults were of the loans of upto 4 lakh
  4. 4.  To encourage banks to lend to students  1000 cr credit guarantee fund that banks can draw upon in case of defaults on loan payments  Plan is to give cover against default to 65% of the loan amount  was requested by the state-owned banks after the government pressurized them to provide education loans even if it is not so lucrative  Idea- No child should miss out the opportunity to pursue studies due to the lack of financial resources  Banks would pay premium to the entity which is managing the fund
  5. 5. Conditions  Claim only if borrowed to study from accredited education institutes. Currently 1100 institutes accredited by Indian Banks Association  Borrowed for studies within India
  6. 6. Other proposals  Lending for skill development courses  Extension of education loan tenure from 5-7 years  Supporting vocational courses These are in line with the government’s MAKE IN INDIA and SKILL INDIA campaigns. It doesn’t include skill development training institutes because they are run by private entities and NGOs