New Delhi: Indian Banks Association (IBA) has formulated and circulated ‘Model Education Loan Scheme’ to all member banks for providing financial support to meritorious students to pursue higher education in India and abroad.
The banks will provide loan up to Rs. 1 million for studying in India and up to Rs. 2 million to study in abroad. Collateral free loans of up to Rs. 7,50,000 will be provided under the ‘Credit Guarantee Fund Scheme for Education Loans’ (CGFSEL), followed by the time limit of 15 years for the repayment of the loan.
The scheme provides certain concessions on educational loans including 0.5% concession in the interest rate to the girl students, rebate in income tax to the extent of interest paid on education loan, 1% interest concession if interest is serviced during the study period and subsequent moratorium period prior to the commencement of the repayment.
After the completion of studies, the students will be provided with the moratorium of 1 year for the repayment of the amount granted, in all the cases. The moratorium for the incubation period will be granted, if the student wants to take up a start-up venture after graduation.
Simple interest for loan is calculated from the date of disbursement of loan to the end of moratorium period therefore the interest is never risen up to the principal amount. The interest accrued is clubbed with the principal and EMI, at the time of repayment. The servicing of interest is optional for the students during their study period.
IBA has also introduced ‘Interest subsidy scheme’ on educational loans, for the students belonging to economically weaker sections.
The scheme provides full interest subsidy up to Rs. 7,50,000 during the period of moratorium on educational loans disbursed on or after 1st April, 2009.