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.

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 Certificate
Educational Loans Retail Banking Chapter 12

2. Introduction & Eligibility
As per the suggestion of R.B.I. that the every
meritorious student should get facility of education with
financial support even though he /she is poor. Banks offer loans
for following different courses in India or abroad.
The eligibility of student is should be Indian. Secured
admission through entrance test/selection process. There is no
need to have secured a minimum qualifying mark.
Educational Loans Retail Banking Chapter 12

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 courses
Educational Loans Retail Banking Chapter 12

4. Expenses Considered for and Amount of
Loan
The 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 for
abroad.
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. Margin and Security
Loans up to Rs. 4 lakhs required no margin. But above
Rs. 4 lakhs the same should be 5% for studies in India and 15%
for studies abroad. The scholarship/assistantship to be included
in margin. It may be brought year to year basis as and when
disbursements are made on a pro-rata basis.
As the case with margin the security is also not required
up to Rs. 4.00 lakhs. Above that a collateral security of suitable
value or co-obligation of parent along with assignment of future
income should be obtained.
Educational Loans Retail Banking Chapter 12

6. Documentation
The documents has to be executed for this type or loan
from both parents and student. In case of security it can be in
the form of land/building/Government securities/units of UTI,
NSC, KUP, gold etc. in case of loan is to be provided for
purchase of loan the same should be hypothecated. Bank who
wish to support highly deserving/meritorious students without
security may delegate such powers to a fairly higher level
authority.
Educational Loans Retail Banking Chapter 12

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. 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. 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. 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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