Guide to Education Loans from Banks in India

Guide to Education Loans
& Skill Loans
From Banks in India
Make Your Dreams Real
Compiled by
Rtn.Aslam S. Merchant
[Retd.Banker]
President (2016-17)
Rotary Club of Bombay West
www.rcbw.org
rtn.asmerchant@gmail.com
July 2016 Edition (5000 copies)

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Preface
Government of India has been taking several initiatives to promote higher education and
vocational education. One such initiative of the Government of India has been facilitating
affordable institutional funding of higher education and vocational courses. Guide to
Education Loans from Banks in India – Make Your Dream Real is aimed at creating
awareness amongst the students and their parents about the Education Loan Schemes from
Scheduled Banks in India and how to avail them for fulfilling the career dreams.
About Rotary
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million Individuals called Rotarians are members of these clubs.
Rotary International has been making history and bringing our world closer together for over
111 years. Since forming in 1905, the organization has taken some of the world’s toughest
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The impact starts with members – people who work tirelessly with their clubs to solve some
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and The Rotary Foundation which turns generous donations into grants that fund the work of
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Rotary International has identified specific causes to target to maximize our local and global
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efforts in promoting peace, fighting disease, providing clean water, saving mothers and
children, supporting education and growing local economies.
1
st
July, 2016
Disclaimer:
Contents of this publication have been compiled from information available in public domain
for broad understanding of the subject. Students and their parents / guardians are advised to
approach a nearest branch of a Bank to get complete details of their education loan schemes
for higher education and vocational courses as well as the Central Interest Subsidy Scheme
of Government of India. Granting of loans is at the discretion of individual banks. Rotary
International or any of its affiliated Clubs / Officials should not be held responsible for any
errors or omissions in this publication.

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Contents
1.Introduction.......................................................................................................... 3
2.Borrowing for Education for Higher Studies – How It Works.......................... 4
3.Salient Features of Education Loan for Higher Studies .................................. 6
4.Salient Features of Skill / Vocational Loan from Banks in India..................... 7
5.Government’s Interest Subsidy Scheme .......................................................... 8
6.Government’s Padho Pardesh Scheme for Minorities .................................... 9
7.Website Links of Banks’ Education Loan Schemes .......................................10
8.IBA’s Model Education Loan Scheme for Higher Studies..............................11
9.IBA’s Model Skill / Vocational Loan Scheme ..................................................19
10.Sample Check List of Documents ..................................................................23

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1.Introduction
The Government of India in coordination with Reserve Bank of India has taken the following
initiatives for facilitating affordable bank finance for higher education and vocational courses:
a. Advising Scheduled Banks in India to implement the Model Education Loan Scheme
developed by Indian Banks Association (IBA) for Higher Education (post HSC level) as
revised from time to time.
b. Launch of Central Interest Subsidy Scheme in 2010 linked to the above Loan Schemes of
Banks where 100% Interest charged by the Bank is subsidised by Ministry of HRD, Govt of
India for students belonging to economically weaker sections (defined as those families
having gross annual income of upto Rs.4.50 lacs) during the moratorium period – which is
course period plus 1 year after completion of the course.
c. Launch of Padho Pardesh – Scheme of Interest Subsidy on Educational Loans for
Overseas Studies for the Students belonging to Minority Communities
d. Advising Banks in India to implement the Model Education Loan Scheme for Vocational
Courses developed by IBA in May 2012. In June 2015, this Scheme was substituted by a
similar Loan Scheme viz. Skill Loan Scheme.
All the major Banks in India have since launched these loan schemes for students and the
Central Interest Subsidy Scheme is operational with a public sector Bank acting as nodal
bank on behalf of Ministry of HRD and IBA as coordination agency.
In terms of the loan schemes and guidance given to the Banks –
1. The Banks are advised to assess the loan applications based on the student’s future
earning potential;
2. Banks have to extend repayment holiday (moratorium) for principal and interest for
the course period and one thereafter;
3. Repayment of principal and accumulated interest begins after the repayment holiday
and can extend upto 15 years; Interest is calculated on simple basis during the
repayment holiday;
4. Banks cannot insist on third party security / guarantee for loans upto Rs.4 lacs – only
parent signs as co-borrower/co-applicant;
5. Banks cannot charge processing fees or prepayment fees for Education Loans.
The above initiatives have opened up a world of opportunities for India’s growing young
population – particularly those from the economically weaker sections of the society - who
hitherto did not have access to easy funding for higher education and vocational courses. A
real opportunity to Make Your Dreams Real…

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2.Borrowing for Education for Higher Studies – How It Works
With the availability of bank loans for higher education, you can make your dreams real. With
a little efforts by parents, a student can avail Education Loan from a Bank in India to fund
higher education after HSC (XIIth Standard)
This is how a typical Education Loan will work for you…
Say you plan to take up a 4-year course in India which will cost Rs.105,250 per year
aggregating Rs.421,000 for the 4 years. You are eligible for Government of India’s Central
Interest Subsidy Scheme (Refer Chapter 5). You can avail an Education Loan of Rs.400,000
with the balance Rs.21,000 as your margin contribution. The bank will disburse Rs.100,000
per year and your margin contribution every year would be Rs.5,250.
Assuming that you are starting the course in the year 2016-17 and the rate of interest
charged by the Bank is 10% per annum, this is how your loan account will look basis certain
assumptions:
2016-17 2017-18 2018-19 2019-20 2020-21
Opening Loan Balance 0 100000 200000 300000 400000
Loan Disbursed 100000 100000 100000 100000 0
Interest @ 10% 10000 20000 30000 40000 40000
Principal + Interest 110000 220000 330000 440000 440000
Less: Interest Subsidy 10000 20000 30000 40000 40000
Closing Loan Balance 100000 200000 300000 400000 400000
You complete your course in 2019-20 and you get one year’s moratorium before you start
repaying your Education Loan with Interest from 2021-22.
You will observe that the entire interest of Rs.140,000 charged by the bank during the five
years from 2016-17 to 2020-21 is received by the bank as central interest subsidy. Hence,
your loan outstanding as on the commencement of 2021-22 is Rs.400,000 which was
disbursed to you over the period of 4 years.
The Equated Monthly Instalment (EMI) will be calculated on Rs.400,000 for a maximum loan
repayment period of 15 years starting from 2021-22. Assuming an interest rate of 10% per
annum, the EMI will work out to Rs.4300 per month.
The interest component of the EMI is currently exempted from Income Tax under Section
80E. You can always prepay the Education Loan and save on interest expenses without
having to pay any prepayment penalty / charges.
To borrow or not to borrow for education?
This is the question which is often asked by the parents. Is it prudent to borrow for education
costs? Will it not be a burden to repay the loans and service the interest – both for the
parents and the students?

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With the ease of availing loans for Education from Banks in India coupled with the
Government incentives like the Interest Subsidy Scheme and Tax Benefit on Interest on
Education Loans, borrowing for the purpose of education is an extremely lucrative option.
However, one should be aware of the risks associated with this decision.
With unstable economy and uncertain employment after completion of the course, taking an
Education Loan is clearly a risk, but often a necessary one. Whether one should avail an
Education Loan or not will depend upon academic competency, expected earning potential
after completion of the course, employment outlook and whether or not the student will need
to continue further studies after the course. Also, the Government Schemes like Central
Interest Subsidy on Education Loans or Income Tax benefit on Interest on Education Loans
from Banks in India, etc. are subject to change / modification by the respective Government
Departments. Decision to borrow for education solely based on these Government Schemes
is fraught with associated risk. It is, therefore, prudent to assess these factors before deciding
on taking Education Loan.
Borrow only to cover the funding gap in education related costs. Also, clearly understand the
terms and conditions and repayment schedule of the Education Loan. It is extremely
important to ensure you will be able to meet the repayment commitments once the loan
servicing commences after the course period + moratorium period of one year. Any defaults
or delays will impact your credit score which is maintained by CIBIL (Credit Information
Bureau India Limited). Low credit scores will affect your ability to borrow in future for your
other needs like housing, etc. Also, your future employers may consider taking a look at your
credit history before offering you employment.

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3.Salient Features of Education Loan for Higher Studies
Salient of the Education Loan Schemes from Banks in India as advised by IBA
Education Loan Scheme for Higher Education (after HSC level)
 Amount of Finance : Rs.10 lacs for study in India and Rs.20 lacs for study abroad
 Margin Contribution from Student / Parent :
o NIL for loans upto Rs.4 lacs.
o For loans of more than Rs.4 lacs, margin of 5% for study in India and 15% for
study abroad
 Security / Guarantee:
o No Security or third party guarantee to be insisted upon for loans upto Rs.4
lacs.
o For loans more than Rs.4 lacs and upto Rs.7.50 lacs, suitable third party
guarantee to be provided.
o For loans more than Rs.7.50 lacs, collateral security of the value acceptable
to the Bank.
 Rate of Interest:
o As per bank’s pricing policy.
o Interest payable on Education Loans is currently exempt from Income Tax
u/s 80E
o Banks may provide 1% concession if interest is serviced during study period.
 Processing Charges:
o NIL for studies in India.
o For studies abroad, Banks may charge upfront fees which will be refunded
upon student taking the course.
o Banks may, however, charge fee levied by third party service providers who
operate common portal for lodging applications online.
 Repayment Holiday:
o No repayment to be made by student / parent during study period plus one
year.
o Payment of interest during the repayment holiday is optional for student /
parent.
o Interest to be accumulated on simple basis and added to principal amount for
calculation of EMI post repayment holiday.
 Repayment Period: Upto 15 years (after repayment holiday) in Equated Monthly
Instalments.
 Central Interest Subsidy: Loans for study in India eligible for Central Interest Subsidy
(details follows in this publication)

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4.Salient Features of Skill / Vocational Loan from Banks in India
 Amount of Loan ranging from Rs.5,000/- to Rs.150,000/-
 Margin Contribution by Student / Parent : Max.10% (including interest and/or principal
repayments during course period)
 Repayment Holiday : For course duration of upto 1 year – 6 months from completion
of course and for course duration of above 1 year, 12 months from completion of
course.
 Repayment Period ranging from 3 years to 7 years after the repayment holiday
 Central Interest Subsidy Scheme not applicable for this loan scheme.

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5.Government’s Interest Subsidy Scheme
Government of India’s Interest Subsidy Scheme on Education Loans for Higher
Studies in India
The Government of India has launched a scheme to provide full interest subsidy during the
period of moratorium, on loans taken by students belonging to Economically Weaker
Sections from scheduled banks under the Educational Loan scheme of the Indian Banks’
Association, for pursuing any of the approved courses of studies in technical and professional
streams, from recognised institutions in India.
Salient Features of the Scheme are as under:
1. Scheme is effective from academic year 2009-10.
2. Applicable to students from EWS (economically weaker section) families with a
parental upper income limit of Rs.4.50 lacs per year. {Income Certificate to be
obtained from State designated authority e.g. Tehsildar in Maharashtra or
Dist.Collector / Dy.Collector / Asst.Collector / Prant Officer / Mamlatdar in Gujarat.}
3. Available for studies in recognised technical and professional courses in India after
class XII. Applicable for study in institutions recognised by the concerned statutory
bodies and central educational institutions in India.
4. Interest subsidy is 100% of the interest charged by the Bank during the moratorium
period.
5. Moratorium period in relation to Education Loan is course period plus 12 months.
In case a student is eligible to claim the subsidy and would like the Bank to do so, he/she will
need to submit the following after the loan is availed :
a. Information Sheet – information required for the scheme like whether the student
has availed / claimed subsidy under any other scheme, whether the student is
differently-abled / belongs to SC/ST/OBC / Minority Community, etc.
b. Agreement on Stamp Paper duly signed by the borrower and co-borrower in
presence of an official from the bank’s branch where the Education Loan A/c is
set up and maintained;
c. Income Certificate from the designated authority. (List as per Annexure)
This scheme does not modify the terms of sanction of the existing loans and that the
borrowers will need to continue to repay and/or service interest on the loan account as per
sanction terms. As and when the Bank receives the subsidy amount under the scheme, it
shall credit the loan account under intimation to student. This Scheme is not available for
Education Loans for Studies Abroad or for Vocational Courses.

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6.Government’s Padho Pardesh Scheme for Minorities
Government of India’s Padho Pardesh
Scheme of Interest Subsidy on Educational Loans for Overseas Studies for the
Students belonging to Minority Communities
The Objective of this scheme is to award interest subsidy to meritorious students belonging to
economically weaker sections from minority communities. The scheme is applicable for
higher studies abroad. The Interest Subsidy Scheme shall be linked with the existing
Educational Loan Scheme of IBA and restricted to students enrolled for course at Masters,
M.Phil and Ph.D levels.
Total income from all sources of the employed candidate or his/her parents/guardians in case
of unemployed candidate shall not exceed Rs.6.00 lacs per annum. Income Certificate to be
submitted from competent authority.
Under the Scheme, interest payable by the students on education loans during the
moratorium period (repayment holiday) as prescribed under the Education Loan Scheme of
IBA, shall be borne by Government of India. After the moratorium period is over, the interest
on the outstanding amount shall be paid by the student along with the principal amount of the
loan.
For further information on this Scheme, please download the Scheme Document by clicking
on the link below:
[Extracts of the Scheme Only. Please visit http://www.minorityaffairs.gov.in/padho_pardesh for
complete details.]

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7.Website Links of Banks’ Education Loan Schemes
LINKS TO EDUCATION LOAN SCHEMES OF
SOME OF THE BANKS IN INDIA
Bank Name
Website URL
IDBI Bank Ltd. http://www.idbi.com/education-loan.asp
State Bank of India
http://tinyurl.com/SBI-EduLoans
Bank of Maharashtra
http://tinyurl.com/BOM-EduLoans
Bank of India
http://tinyurl.com/BOI-EduLoans
Bank of Baroda
http://tinyurl.com/BOB-EduLoans
Canara Bank http://tinyurl.com/CAN-EduLoans
Union Bank of India
http://tinyurl.com/UBK-EduLoans
Dena Bank
http://tinyurl.com/DB-EduLoans
Corporation Bank http://www.corpbank.com/node/58910
Central Bank of India
http://tinyurl.com/CBI-EduLoans
Indian Bank http://www.indian-bank.com/education.php
Indian Overseas Bank http://www.iob.in/vidya_jyothi.aspx
Punjab National Bank
http://tinyurl.com/PNB-EduLoans

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8.IBA’s Model Education Loan Scheme for Higher Studies
MODEL EDUCATIONAL LOAN SCHEME OF
INDIAN BANKS ASSOCIATION
FOR PURSUING HIGHER EDUCATION IN INDIA AND ABROAD
(2015)1
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, public
funding of higher education is not considered feasible. Cost of education has been going
up in recent times and since the student has to bear most of the cost, there is a clear
case for institutional funding in this area. This model education loan scheme is an
attempt to bring out a viable and sustainable bank loan scheme to meet the aspirations
of our society.
Knowledge and information would be the driving force for economic growth in the
coming years. The current rate of economic growth of the country demands technically
and professionally trained man power in large numbers. In this backdrop, loans for
education are seen as investments for economic development and prosperity. The
model Education Loan Scheme was developed by the Indian Banks’ Association to help
meritorious students pursue higher education in technical and professional courses. As
the focus is on development of human capital, repayment of the loan is expected to
come from future earnings of the student after completion of education. Hence the
assessment of the loan will be based on employability and earning potential of the
student upon completion of the course and not the parental income/family wealth.
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
implementations 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 education loans
with limits above 4 lakhs and up to 7.5 lakhs. The scheme was further modified in the
year 2007-08 based on experience gained in the operation of the scheme over the
years.
With increased public awareness about the benefits of the education loan scheme, bank
branches were receiving more and more applications for loans every year. This also
resulted in cases of customer grievances due to misinterpretation of the provisions of the
scheme. To make the scheme more transparent and to minimize scope for multiple
interpretations leading to disputes, a review exercise was taken up in September 2012.
The current revision enlarges the coverage under the Scheme and attempts to address
1
Text of Model Education Loan Scheme issued by Indian Banks’ Association (IBA) to Member Banks
in India vide its circular No.CIR/RB-ELS/6 dated 17th
August, 2015. [Source : www.iba.org.in]

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some of the weaknesses noticed . The revised scheme provides for uniform moratorium
of one year and longer repayment periods for the loans. The terms of sanction like
margins and security have also been relaxed for loans covered by Credit Guarantee
Scheme of the Government. Following feedback received from other stake holders,
some of the suggestions brought out in the RBI proposal for Higher Education Lending
Programme (HELP) have also been incorporated in this Scheme. The amendments to
the Scheme were cleared by the Managing Committee of the Association at its meeting
held on 26th
June 2015.
2. OBJECTIVES OF THE SCHEME
The Educational Loan Scheme outlined below aims at providing financial support from
the banking system to meritorious students for pursuing higher education in India and
abroad. The main emphasis is that a 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.
3. APPLICABILITY OF THE SCHEME
The scheme detailed below could be adopted by all member banks of the Association or
other banks and financial institutions as may be advised by the Reserve Bank of India.
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 as deemed fit.
4. ELIGIBILITY CRITERIA
4.1 Students 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.
Note:
It would be in order for banks to consider a meritorious student (who qualifies
for a seat under merit quota) eligible for loan under this scheme even if the
student chooses to pursue a course under Management Quota.
4.2 Design elements for classification of education loans
It is proposed to classify the education loan portfolio into three categories viz.
a. Loans to students admitted to top rated institutions
b. Loans to students admitted to other domestic institutions
c. Loans to students seeking studies abroad.

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It is expected that depending upon risk perception, reputation of the institution
and employability of the students banks will be able to fine tune their terms and
conditions of sanction suitably to these categories.
The guidance note attached to the scheme gives elaboration of design elements
for classifying educational loans
5. COURSES ELIGIBLE
5.1. 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/ Government/
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, degree/diploma in nursing or any other
discipline approved by Director General of Civil
Aviation/Shipping/Indian Nursing Council or any other
regulatory body as the case may be, if the course is pursued
in India.
Approved courses offered in India by reputed foreign
universities.
Note:
1. 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.
2. Courses other than the above offered by reputed
institutions may also be considered on the basis of
employability.
Reference : www.ugc.ac.in, www.education.nic.in, www.aicte.org.in
5.2 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.
Reference: www.webometrics.info (indicative only)

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5.3 Expenses considered for loan
i. Fee payable to college++/ school/ hostel*
ii. Examination/ Library/ Laboratory fee
iii. Travel expenses/ passage money for studies abroad
iv. Insurance premium for student borrower, if applicable
v. Caution deposit, Building fund / refundable deposit supported by Institution
bills/receipts. **
vi. Purchase of books/ equipment’s/ instruments/ uniforms***
vii. Purchase of computer at reasonable cost, if required for completion of the
course***
viii. Any other expense required to complete the course - like study tours,
project work, thesis, etc.***
ix. While computing loan required, scholarships, fee waiver etc., if any available
to the student borrower may be taken into account.
x. If the scholarship component is included in the loan assessment, it may be
ensured that the scholarship amount gets credited to the loan account when
received from the Government.
Notes:
++ For courses under Management quota seats considered under the
scheme, fees as approved by the State Government/Government
approved regulatory body for payment seats will be taken, subject to
viability of repayment.
* 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.
6. 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.

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Note:-
Banks may consider capping stream wise/ institution wise cap on education loan
amount by taking into account reputation and placement history of the education
institution concerned. 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, though it may exceed priority sector norms fixed by
the RBI.
7.MARGIN
Upto 4 lakhs Nill
Above 4 lakhs Studies in India 5%
Studies Abroad 15%
However, upto Rs.7.5 lakhs, margin will be ‘Nil’, if loan is eligible for the Credit
Guarantee
- 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.
8. SECURITY
Upto 4 lakhs No security
Parents to be joint borrower(s). However, banks will
have discretion to waive this clause.
Above 4 lakhs Besides the parent(s) executing the documents as
joint
and up to 7.5 lakhs 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).
However, third party guarantee will be waived if the
loan is eligible for Credit Guarantee coverage.
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
installments.
Note:-
The loan documents should be executed by the student and the parent/ guardian
as joint-borrower.

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The security can be in the form of land/ building/ Government securities/ Public
Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, and 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.
9. RATE OF INTEREST
Interest to be charged at rates linked to the Base rate as decided by individual
banks. Banks may charge differential interest rates for collateralized and non-
collateralised loans.
Simple interest to be charged during the study period and up to
commencement of repayment. Simple interest may be charged even during
any subsequent moratorium considered.
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.
10. 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 loan to be disbursed in stages as per the requirement/ demand directly
to the Institutions/ Vendors of equipments / instruments to the extent
possible.
11. REPAYMENT
Repayment Holiday / Moratorium Course period + 1 year. Banks may also
provision for moratorium taking into account spells of under-

17
employment/unemployment, say two or three times (maximum of 6 months at a
time) during the life cycle of the loan. Banks may also encourage student
borrowers who wants to set up start-up units by giving moratorium on repayment
of principal and interest during incubation period which may be considered unto 2
years.
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 a period of 15 years
for all categories.
 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.
11. INSURANCE
Banks may, make it mandatory to arrange for life insurance policy on the students
availing Education Loan. Individual Banks may work out the modalities with
insurance companies.
13. 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 Social Security Number (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.
14. 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.

18
The fee would however, be refunded upon the student taking up the course).
Note: However, the student applicant may be required to pay fee /charges, if any
levied by third party service providers who operate common portal for lodging loan
applications.
15. 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.)
16. OTHER CONDITIONS:
16.1 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.
16.2 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.
16.3 Top up loans
Banks may consider top up loans to students pursuing further studies within
the overall eligibility limit.
16.4 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.
16.5 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.
16.6 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.

19
9.IBA’s Model Skill / Vocational Loan Scheme2
Indian Banks’ Assocation Model Skill Loans Scheme
1. INTRODUCTION
Given a huge thrust on skill development in recent years, a need is felt to provide
institutional credit to individuals for taking skill development courses aligned to National
Occupations Standards and Qualification Packs and leading to a
certificate/diploma/degree by the Training Institutes as per National Skill Qualification
Framework (NSQF). Thus, “Skill Loan Scheme” has been developed to support the
national initiatives for skill development.
2. OBJECTIVE
Skill Loan Scheme (herein after called „Skilling Loan‟) aims at providing a loan facility to
individuals who intend to take up skill development courses as per the Skilling Loan
Eligibility Criteria.
3. APPLICABILITY OF THE SCHEME
This scheme is applicable to all member banks of IBA and any other banks and financial
institutions as may be advised by the RBI. The scheme provides broad guidelines to the
banks for operationalizing the skilling loan scheme and the implementing bank will have
the discretion to make changes as deemed fit. The scheme may also be applicable to
Microfinance Institutions (MFIs) and other financial institutions regulated by RBI.
4. ELIGIBILITY CRITERIA
4.1 Training Institutes: Any individual who has secured admission in a
course run by Industrial Training Institutes (ITIs), Polytechnics or in a
school recognized by central or State education Boards or in a college
affiliated to recognized university, training partners affiliated to National
Skill Development Corporation (NSDC)/Sector Skill Councils, State Skill
Mission, State Skill Corporation, preferably leading to a certificate /
diploma / degree issued by such organization as per National Skill
Qualification Framework (NSQF) is eligible for a Skilling Loan. The
Government of India / State Governments may, from time to time, notify
institutes/organizations for the purpose.
2
Text of Skill Loan Scheme recommended by IBA to member Banks vide its Circular
No.RB/CIR/SLS/1051 dated 10th
July, 2015

20
4.2 Training Courses: Courses run by above mentioned Training Institutes
(in 4.1) aligned to National Skill Qualification Framework (NSQF) shall be
covered by the Skill Loan. There is no minimum course duration.
4.3 Nationality : The applicant should be an Indian National
4.4 Minimum Age : There is no specific restriction with regard to the age of
the student to be eligible for skilling loan. However, if the student is a
minor, while the parent executes documents for the loan, the bank will
obtain a letter of acceptance / ratifications from him / her upon attaining
majority.
4.5 Minimum Qualification: As required by the enrolling institutions /
organizations as per NSFQ
4.6 Know Your Customer (KYC) norms: Aadhar number will also be
considered as a valid proof for KYCL norms in addition to other identity
and address proof as determined by respective banks / lending institutes.
5. QUANTUM OF FINANCE
Loans will be in the range of Rs. 5,000/- to Rs. 150,000/-. The estimated per month fees,
based on sector & NSQF level, will be available with the NSDC. Skill loan could be
availed by beneficiaries of other grant/reward based Government schemes for skill
training to cover the cost of such skill training not covered under such grant/reward.
6. EXPENSES CONSIDERED FOR LOAN
6.1. Tuition / course fee. Banks shall pay such tuition / course fee directly to the Training
Institute
6.2. Any other reasonable expenditure found necessary for completion of the course
including but not limited to assessment fee, Examination fee, Library charges,
Laboratory fee, Caution deposit, Purchase of books, equipment’s and instruments (As
such courses are localized boarding, lodging may not be necessary based on the cost of
living in the particular area. However, wherever it has been found necessary, the same
could be considered on merit).
7. MARGIN
The banks/MFIs can charge nominal margin money as down-payment from the student,
to keep the student serious about the course. However, the down-payment and the
amount paid as Interest during the course (Clause11) together should not exceed 10%
of the total course amount.
8. RATE OF INTEREST
Interest rate to be charged linked to the base rate of banks as decided by the individual
banks or at reduced rate, if an interest subsidy is provided by the Central / State Govt. to
all or a class of beneficiaries proposed to be targeted. Simple Interest will be charged
during the study period and upto commencement of repayment.

21
Note :
• Servicing of interest during study period and the moratorium period till
commencement of repayment is optional for students.
• 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.
9. PROCESSING CHARGES
No Processing fee will be charged by Banks/MFIs.
10. SECURITY
No collateral for such skilling loan will be taken. Banks have option to apply to the
National Credit Guarantee Trust Company Ltd (NCGTC) for credit guarantee against
defaults and NCGTC will provide such guarantee at nominal guarantee fee which shall
not exceed 0.5% of the amount outstanding. Such credit guarantee cover will be for a
maximum of 75% of the outstanding loan amount (including interest, if any). In special
cases such as the North Eastern region (NE) and Left Wing Extremism (LWE) affected
areas the percentage may be increased on the discretion of NCGTC. Banks may like a
diversion on whether to pass on levy of guarantee fee to the borrower or not.
11. MORATORIUM PERIOD
In order to instill repayment behavior and get some commitments from the students, the
bank may have installment during the course period itself. However, the total amount
paid by the student as down-payment (Clause 7) and EMI during the course together
should not exceed 10% of the total course value.
However, it is advised that the banks consider moratorium for specific courses or certain
sections of the students. Upon completion of the course, repayment will start after a
moratorium period as indicated below:
Courses of duration upto 1 year upto 6 months from the completion of the
course
Courses of duration above 1 year 12 months from the completion of the
course
The banks will have flexibility to choose the structure of repayment - flat Equated Monthly
Instalments (EMI), tube payments or moratorium period as deemed fit for various sectors
and student categories.

22
12. REPAYMENT
The loan will have a tenure as follows:
Loans upto 50,000 - Upto 3 years
Loans between 50,000 to 1 lakh - Upto 5 years
Loans above 1 lakh - Upto 7 years
13. INSURANCE
Optional at the requirement of the borrower
14. PREPAYMENT
The borrower can repay the loan any time after commencement of repayment without
having to pay any prepayment charges. In case a student is not able to complete the
course because of accident/death/disability the bank can seek a pro-rata reimbursement
of the unfinished portion of the course amount from the training institute. This will reduce
the loan burden on the student.
15. Bank Mitra
Services of Bank Mitra may be used by the Banks/MFIs to popularize the scheme. Such
Bank Mitra will work as a bridge between bank, training institute and trainee/ loan
aspirants. However, at no point of time can a training institute or an entity with a
significant stake in training (students of which will get the loan) be involved as Bank Mitra.
Training institutes and lending architecture (entities and people down to the last mile)
should be kept at arm's length to avoid any moral hazard or miss-selling of the loan
scheme. A bank employee or its bona fide agency representative should necessarily
meet the student to explain the loan details.

23
10.Sample Check List of Documents
 •Application Form, Photograph of Applicant / Co-Borrower
 •KYC (Know Your Customer) Documents of Applicant / Co-Borrower viz. Identity,
Signature & Address Proof
 •Employment and Income details of Applicant / Co-Borrower – Employment ID,
Salary Slip or Certificate, Form 16, Bank Statement, Income-tax Returns. If in
business, proof of business ownership, Shop & Establishment Licence, ST Regn,
VAT Regn.
 •Academic Track Record Details – Mark Sheets, Certificates, etc.
 •Details of Proposed Education Course – Prospectus of Edu Institute, Fees Details
along with other Exps, Fees Payment Structure, Margin Payment Receipt (if
applicable)
 A statement from Student on the prospects of employment after completing the
chosen course.
 •Security / Guarantor details, wherever applicable.
 •INCOME CERTIFICATE FROM DESIGNATED STATE AUTHORITY (e.g.
TEHSILDAR in Maharashtra or Dist.Collector / Dy.Collector / Asst.Collector / Prant
Officer / Mamlatdar in Gujarat for claiming Interest Subsidy (This document may be
required to be submitted after availing the Loan)
 Additional Information as may be required by the Bank for claiming Interest Subsidy.
Note: This is only indicative list. Please check with the Bank on the documents required
for processing the loan and interest subsidy

Guide to Education Loans from Banks in India

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