According to Reserve Bank of India guidelines, all education loans up to Rs 4 lakh are collateral-free. Further, the government has launched a Credit Guarantee Fund Scheme for Educational Loan, wherein collateral free loan is given up to Rs 7.5 lakh
A credit guarantee of up to Rs 7.5 lakh is provided without any collateral security and third-party guarantee for education loans covered under the Indian Banks’ Association (IBA) model education scheme under the under the Credit Guarantee Fund Scheme for Educational Loan (CGFSEL) scheme, according to a recent statement by Dr. Bhagwat Karad, Minister of State in the Ministry of Finance.
The department of higher education in the Ministry of Education handles the CGFSEL scheme.
Karad said this in response to questions raised in Lok Sabha on whether the government intends to raise the guarantee limit for education loans for higher studies in India from Rs 7.5 lakh to Rs 10 lakh.
There was also other questions raised on the details of the total education loans disbursed by public sector banks (PSBs) and scheduled commercial banks (SCBs) in financial years 2019-20, 2020-21, and 2021-22. These questions related to provisional data for the current FY, and bank-wise details of the total gross non-performing assets (NPAs) of PSBs and SCBs on education loans during the said period. Other questions related to whether PSBs were wary of sanctioning education loans due to an increase in defaults, and if so, the reasons thereof. Also, what steps were being taken by the government to prevent delays and denials in sanction of education loans by banks and improve lending in the educational space?
According to information available with the Reserve Bank of India (RBI ), the total education loan disbursed by SCBs in 2021-22 was Rs 17,715.33 crore, which was lower than Rs 18,350.83 crore in 2020-21, and Rs 18,553.46 crore in 2019-20.
Total education loans disbursed by PSBs in 2021-22 was Rs 15,445.62 crore, lower than Rs 16,984.98 crore in 2020-21, which was a tad higher than Rs 16,643.77 crore in 2019-20, according to the RBI.
“According to RBI guidelines, all education loans up to Rs 4 lakh are collateral-free. Further, the government has launched a CGFSEL wherein collateral-free loan is given up to Rs 7.5 lakh. RBI has informed that the Model Education Loan Scheme, 2021 encompasses, inter-alia, broad guidelines regarding eligibility criteria, courses eligible for a loan, the quantum of finance, security and margin, rate of interest, etc., and banks are broadly guided by the above scheme while sanctioning educational loans,” the statements says.
Further, the government has also launched an online portal, the Vidya Lakshmi Portal (VLP) to ensure hassle-free education loans through a single window system to students.
Normally, sanction/rejection will be communicated within 15 days of receipt of a duly completed application with supporting documents in the bank.
Rejection of loan application, if any, shall be done with the concurrence of the next higher authority and conveyed to the student stating the reason for rejection. Further, the sanction, as well as rejection (with reasons), should also be reported by the bank concerned on the VLP portal.