The government will soon move a Cabinet note on the Credit Guarantee Fund (CGF),which seeks to provide education loans up to R7.5 lakh without any collateral security and third party guarantee. Finance minister P Chidambaram had said this will be operational by the fiscal-end. The fund seeks to ensure better flow of credit for deserving students.
The finance ministry has directed Indian Banks Association (IBA) to revise its circular on education loan to ensure that no eligible student is denied loan and impose penalties on loan officers if they reject applications without any sound reason. So far,there have been close to 5,200 complaints in education loans,including denial of loans.
The IBA is changing the guidelines because students who secure admission in the management quota are not considered meritorious eno-ugh to be eligible for education loans. Some bankers are not willing to extend loans to them, said a senior human resource development (HRD) ministry official.
Currently,loans above R4 lakh and up to R7.5 lakh are secured by way of a third party guarantee. But under the Credit Guarantee Fund Education Trust (CGFT) scheme,education loans up to R7.5 lakh without any collateral security and third party guarantee,would be covered up to 75% of the amount in default.
Under the present model,there is a maximum limit for education loan of R10 lakh for studies within the country and R20 lakh for studies abroad. As per the Reserve Bank of India (RBI) data,the public sector banks have an outstanding R45,787.43 crore of education loans in 23.25-lakh accounts till March 31.
The HRD ministry is also mulling a dispensation for special deserving cases,wherein,banks can be approached for coverage of education loans above R7.5 lakh for providing such loans to highly and exceptionally meritorious and deserving students without collateral security and third party guarantee.
A nominal guarantee fee at a specified rate of 1% per annum of sanctioned loan or as specified by the Trust from time to time shall be paid by the institution availing the guarantee.
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