Saturday, September 17, 2011

Guidance Notes on 2011 Revised IBA Model Edu Loan Scheme

Indian Banks’ Association
Guidance Notes on Model Educational Loan Scheme for pursuing Higher Education in India and Abroad

I. Introduction
Educational Loan Scheme is a socially and economically relevant loan scheme from the Indian banking industry. Rightly, the RBI has included education loans as part of the priority sector lending of banks. It aims to provide need-based finance to meritorious student for taking up higher education. In any commercial lending decision, credit worthiness of the borrower and the viability of the scheme are important. The student borrower has no credit history and as such he is assumed to be creditworthy as this is a futuristic loan. However, it is likely that the joint borrower for the loan has a credit history and any adverse features could have a bearing on the assessment of credit risk. If the joint borrower has a loan account with the bank and the loan is treated as non-performing asset, the bank runs the risk of having to consider the student loan also as NPA ab-initio. To overcome this, the bank may, as a prudent measure insist on a joint borrower acceptable to the bank, in case of adverse credit history of the parent/guardian of the student.

II. Objectives of the scheme
The educational loan scheme is meant to provide need-based assistance to meritorious students in pursuing higher education. Since the word “meritorious” is a relative term it would be necessary for banks to specify parameters for defining the term meritorious.
The following approach is suggested:
If the student has obtained admission to an eligible course through a merit based selection process, he/she could be considered a meritorious student. Generally, admission to professional and technical courses are through common entrance tests and those who get admission through this process could be considered meritorious. Where the admission is purely based on the marks scored in qualifying examinations, the bank may fix cut-off marks (percentage) for loan eligibility . Very often enquiries are made whether the model scheme covers students who are getting admission against management quota. Management seats or management quota refers to the seats in private education institutions for which the management has discretion to give admission on factors other than merit. Usually, out of permitted seats for the batch, a certain percentage is earmarked to be filled from State level merit list and the rest are allowed to be filled by the management at their discretion.
Usually for the management seats the only requirement would be passing of the qualifying examination with certain minimum stipulated marks. It is logical to interpret that these seats do not qualify for being called “meritorious” Banks have reported certain cases where the employment potential would not justify the fee structure for management seats from the point of repayment of the loan being sought. Hence, any loan considered by banks for students getting admission under management quota would be outside the model scheme. Banks may fix appropriate terms and conditions for such loans.

III. Applicability of the Scheme
The Model Scheme has been developed for the benefit of the member banks of the Association. However, other banks and financial institutions can also adopt the model without reference to the Association.

IV. Eligibility Criteria
IV.i. Student Eligibility
For the purpose of this scheme higher education is defined as studies taken up after completion of higher secondary school i.e. Ten plus two stage. The need for bank loan scheme came for discussion in the country for meeting higher levels of fees charged by private managements for technical and professional courses consequent to ban on capitation fee. However, in the model scheme a generalized definition has been adopted for higher studies for wider coverage. It is expected that the banks will decide on the courses for which they will be giving student loans based on employability and consequent ability to repay the loan.
References are often made about the eligibility of students pursuing employment oriented courses like teachers training courses and 3-year technical diploma courses in polytechnic institutions after completion of 10th standard. It is clarified that banks are free to include such employment-oriented courses as eligible course provided they are offered by approved/recognized colleges/institutions.
It need to be noted that while the Central Sector Interest Subsidy Scheme of MoHRD is based on ‘IBA Model Educational Loan Scheme’, the subsidy is applicable only for loans given for Professional and Technical courses (after 12th standard) in India.

IV. ii. Courses eligible
a. Studies in India
The list of courses given in the model scheme is purely indicative in nature. The important thing is that the course is approved/recognized by the designated academic authority/regulatory body for the stream of study concerned. Links to the web sites of the University Grants Commission (UGC), All India Council for Technical Education (AICTE) and the Ministry of HRD (MoHRD) have been provided in the model scheme to serve as guidance on courses and approving authorities for various courses, which fall within the definition of higher studies.
Banks may prepare and publish a list of eligible courses they would consider for sanctioning of student loans. Since employability of students on the completion of the course is an important consideration for loan approval, banks may consider introducing a system of assessing the employability of students through the campus placements system. Details such as percentage of final year students getting job offers through campus placement, average salary offers etc. may be collected in respect of colleges / institutions from which most loan applications were received in the past for evaluation of employability of students. This exercise should be done on an on going basis to reflect the current status.
Note:
While evaluating employability and repayment possibilities, banks should take into consideration, availability of interest subsidy under the MoHRD Central Sector Scheme introduced w.e.f. 1.4.2009. Under the scheme, the Central Govt. subsidises 100% of the loan’s interest during the study period and subsequent moratorium period before commencement of repayment. It is expected that the interest subsidy could bring the EMI for repayment by as much as 30 to 40%. The student hailing from economically weaker section family would benefit from this scheme
b. Studies Abroad
Diploma courses and certificate courses have not been included as eligible courses for the scheme. Post graduate studies leading to PG degrees and PG diplomas offered by reputed institutes/universities only will be covered by the scheme. Assessment of employment potential or future prospects is very important criterion considering the higher cost of studies involved. The web link given in the scheme is for guidance and there could be other links/sources giving such useful information.
c. Expenses considered
The Model scheme is aimed at meeting all genuine study expenses of a student required to complete the study undertaken. It needs to be noted that sometimes, the fee structure varies with type of college/institution within the same State for a given course. The fees charged by the government colleges/ institutes are generally the lowest, with higher fees permitted in aided private colleges/institutions; fee structure being highest in unaided private colleges/institutes. Sometimes the difference between the lowest and highest fee structure levied for the same course by different colleges/institutions is too high to give comfort to a banker in taking credit decision as employment prospects remain same. A practical approach would be to consider approved fee structure for merit quota seats in all colleges/institutions, provided banks are satisfied about repayment prospects on employment.

V. Quantum of finance --
VI. Margin --
VII. Security --
VIII. Rate of interest
In the past, interest rates were linked to the BPLR of banks. With effect from 1st July 2010, the banking system has switched over to base rate linked product pricing for loans and advances. The new system is more transparent and expected to result in better risk based pricing of loans in the country. Also, market competition is expected to bring down interest spreads. Hence it is proposed to leave the interest rates free for banks to decide at their end. However, it is proposed to retain 1% interest concession for servicing of interest during study/moratorium period. It is also expected that the banks will charge relatively lower rates for loans up to ` 4 lakhs and continue concessions hitherto being given to girl students.

IX. Appraisal/Sanction/Disbursement
The model scheme does not look at the financial position of parents while evaluating loan to a meritorious student. Repayment possibilities have to be based on projected future earnings of the student on employment after education. To avoid subjectivity in assessment, it is suggested that the banks may fix from time to time earning potential for various courses, percentage of income to be considered for repayment etc. A well laid appraisal procedure will ensure that the decision to sanction an education loan is based on sound commercial logic, besides serving a noble social cause. The suggestion that bank branches nearest to the residence of parents to consider the loan application was given for better tracking of students during and after study period. Bnanks are, however, free to adopt different norms to suit their business plans.

X. Repayment
Repayment period has been increased to give greater comfort to the student borrowers to repay the loan out of their future earnings. Prepayment options are also provided for persons who would like to clear the loan faster out of better than anticipated earnings. No prepayment charges are to be levied in such cases.

XI. Insurance
Insurance policy should be obtained only with the prior consent of the student borrower. This is more so relevant in case of loans up to ` 4 lakhs where the bank loans are without any security. The clause regarding insurance has been included in the scheme to provide a life cover to the student.
XII. Follow Up/Monitoring --
XIII. Processing Charges --
XIV. Capability Certificate --
XV. Other Conditions --

FAQs 2011 Revised IBA Model Edu Loan Scheme

Model Educational Loan Scheme Indian Banks’ Association

Frequently Asked Questions
Q1.What criteria should be adopted to recognize courses like Nursing, Teacher Training B.Ed for the purpose of grant of education loan and the fees to be considered for such courses?
A. Teacher Training/Nursing/B.Ed.courses will be eligible for education loan provided the training institutions are approved either by the Central Government or by State Government and such courses should lead to Degree or Diploma course and not to Certification course. The revised Model Educational Loan Scheme (2011) covers only merit channel seats for these courses. Banks have been considering study loans to students getting admissions to above mentioned courses under management quota as part of model education loan scheme in the past subject to the condition that the fee considered for assessment of loan was the fee stipulated by the regulatory authority concerned for merit seats in the respective colleges/institutions. The revised model scheme recognizes only merit based admissions. As such any loan to a student admitted under management quota will be outside the model scheme. Such loans will be governed by terms and conditions separately specified by banks including security/collaterals which the bank may stipulate.
P.S: Operational guidelines contained in IBA Circular No.SB/Cir./10-21/3211datedMarch 31, 2010 will stand withdrawn in the light of revision of the scheme

Q2.Can we consider request for education loan in respect of Nursing Colleges having provisional approval/recognition?
A. The Indian Nursing Council gives permission to Nursing colleges to start new courses for a period of 1 year which is renewed on a yearly basis. The practice of renewing the permission is done on a year-to-year basis for both the existing nursing colleges as well as the new nursing colleges. Banks could consider applications from student borrowers seeking education loan for pursuing nursing courses in these institutions which are having provisional approval / recognition.

Q3.How to deal with requests for sanction of collateral free loans to more than one student from the same family? Is the collateral free limit of ` 4.0 lakh for a student or for a family as whole for the purpose of the scheme.
A. Repayment of the education loan is based on the future earning potential of the student. Going by the spirit of the scheme, limit of Rs 4.0 lakh collateral free loan is student specific and not family specific. There is no restriction on giving a second or third collateral free loan to other siblings when one of the siblings has already taken a collateral free loan.

Q4. How to consider request from students who have to stay outside the college campus due to non availability of hostel accommodation?
A. Banks could consider reasonable lodging and boarding expenses, for the purpose of fixing loan limit under the scheme, in case the student is not in a position to get allotment for hostel accommodation within the campus and is required to stay outside the campus in private accommodation.

Q5. Whether the repayment period could be extended at the request of the borrower?
A. Extension of moratorium period or repayment beyond the time specified at the sanction would amount to restructuring of the loan and will be governed by the RBI guidelines on restructuring of advances. However, in case the student takes up higher studies immediately upon completion of the course, the commencement of repayment would get shifted to 6 months from employment or one year from completion of the course whichever is earlier without treating the change as restructuring. This would be so irrespective of whether the student had taken fresh/top up loan for higher studies or not.

Q6. Whether any incentive is available for girl students?
A. Banks generally provide 0.5% or more concession in interest rate to girl students pursuing higher education in India and abroad.

Q7. Whether request received for sanction of loan to meet partial cost of studying abroad can be considered?
A. It is not uncommon for students to take up part-time jobs as permitted by the institutions where they are studying to part fund their education. So they will not be taking loan for meeting entire cost of studies(usually amount mentioned in I-20). Banks may sanction loan for meeting part cost as requested by students in such cases

Q8. Can the bank consider request for loan received from NRIs?
A. Requests received from NRIs can be considered if student is Indian passport holder and they meet other eligibility requirements. However, it would be necessary to accept as security any collateral which is enforceable in India.

Q9. How the student will know whether the application for the loan has been considered or rejected by the bank?
A. The bank should communicate to the student about the sanction of the loan in writing. Similarly, whenever loan applications of student borrowers are rejected, banks should invariably record the reasons for rejection by the bank.

Q10. Whether the means of the joint borrower has any relation to the sanctioning of the loan to the student borrower?
A. Education loan is not sanctioned based on the means of joint borrower who is usually a parent or guardian. For loans up to ` 4.00 lakhs, no collateral is taken. For loans above ` 4.0 lakhs and up to ` 7.5 lakhs, the means of the joint borrower will not be a factor if acceptable third party guarantee is offered. Also, security offered for loans above ` 7.5 lakhs need not necessarily be belonging to the joint borrower.

Q11. How to consider license courses like Aircraft Maintenance Engineering/ Pre Sea training which are neither degree nor diploma, though such courses are approved by authorities like DGCA without affiliating to any university for award of degree?
A. The Aircraft Maintenance Engineering/ Pre Sea training courses must be either a Degree Course recognized by a competent University or Diploma Course recognized by appropriate State Body to be eligible for loan. The employability of the students and employment potential of the courses selected has to be considered while appraising the loan application.

Q12. Whether vocational / skill development study courses, off-campus courses and on-site/partnership programmes are eligible for education loan under the IBA Model Educational Loan Scheme?
A. Vocational / skill development study courses, off-campus courses and onsite/ partnership programmes are not eligible for loan under the IBA scheme.

Q13. What are the eligibility requirements in respect of Diploma / PG Diploma course for financing under studies abroad ?
A. Only degree / post graduation diploma courses pursued abroad are eligible for sanction of loan under the IBA scheme.

Q14. How to deal with cases where the joint borrower becomes defaulter after sanction of education loan?
A. The student loan will not be affected by any change in asset classification of any separate bank borrowing of the joint borrower.

2011 Revised IBA Model Edu Loan Scheme

Indian Banks’ Association
MODEL EDUCATIONAL LOAN SCHEME FOR PURSUING HIGER EDUCATION IN INDIA AND ABROAD

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 is 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 implementation 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 are receiving more and more applications for loans every year. This has also resulted in cases of customer grievances due to misinterpretation of the provisions of the scheme. This review exercise has been taken up to make the scheme more transparent and minimise scope for multiple interpretations leading to disputes.
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.
The scheme details are as under:
4. ELIGIBILITY CRITERIA:
4.1 Student 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.
4.2 Courses eligible
a. 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/ Govt./ 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 etc., approved by Director General of Civil Aviation/Shipping, 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. Considering demand for pursuing nursing courses, banks are free to consider loans for students getting admission through management quota also. However, the fee reimbursement is restricted to fee structure as approved by the State government or regulatory body. Banks may ensure that the student has financial resources to meet the funding gap.
Reference : www.ugc.ac.in, www.education.nic.in, www.aicte.org.in
(b) 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.
· Degree/diploma courses like aeronautical, pilot training, shipping etc provided these are recognized by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.
Reference: www.webometrics.info (indicative only)
4.3 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/ equipments/ 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***
Notes:
* 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.
5. 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.
Note:
The ceilings fixed for studies in India and Abroad correspond to the limits fixed by the RBI for treatment as priority sector lending. It would, however, be open to banks to 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.
6. MARGIN:
Upto `.4 lacs Nil
Above `. 4 lacs Studies in India 5% Studies Abroad 15%
- 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.
7. SECURITY :
Upto `. 4 lakhs
Parents to be joint borrower(s). No security
Above `.4 lakhs and upto `.7.5 lakhs 
Besides the parent(s) executing the documents as joint 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).
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 instalments.
Note:-
· The loan documents should be executed by both the student and the parent/ guardian as joint-borrower.
· The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, 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
8. RATE OF INTEREST :
Interest to be charged at rates linked to the Base rate as decided by individual banks
· Simple interest to be charged during the study period and up to commencement of repayment.
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.
9. 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.
· Normally, loan application will be accepted by the branch nearest to the residence of parents. However, the sanction of loan will be as per delegation of powers by the bank.
· The loan to be disbursed in stages as per the requirement/ demand directly to the Institutions/ Vendors of equipments/ instruments to the extent possible.
10. REPAYMENT:
Repayment holiday/Moratorium
Course period + 1 year or 6 months after getting job, whichever is earlier. 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 periods as under:
For loans upto ` 7.5 lakhs - upto 10 years
For loans above ` 7.5 lakhs - upto 15 years
Note: No prepayment penalty will be levied for prepayment of loan any time during the repayment period.
11. INSURANCE
Banks may, with the consent of the student, arrange for life insurance policy on the students availing Education Loan. Individual Banks may work out the modalities with insurance companies.
12. 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 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.
13. 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. The fee would however, be refunded upon the student taking up the course)
14. 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.)
15. OTHER CONDITIONS:
15.1 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.
15.2 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.
15.3 Top up loans
Banks may consider top up loans to students pursuing further studies within the overall eligibility limit, if such further studies are commenced during the moratorium period of the first loan. The repayment of the loan will commence after the completion of the second course and further moratorium period, as provided under the scheme.
15.4 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.
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.
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.

Agri Land OK for Education Loan Collateral Security





Today's Paper » NATIONAL » KARNATAKA

Published: September 10, 2011 00:00 IST | Updated: September 10, 2011 04:02 IST

Education loan scheme to benefit farmers' children

Staff Correspondent
Launch: Chairman of Karnataka Vikas Grameena Bank C. Sambasiva Reddy releasing booklets on the new education loan scheme for farmers at the Krishi Mela in Dharwad on Friday
Launch: Chairman of Karnataka Vikas Grameena Bank C. Sambasiva Reddy releasing booklets on the new education loan scheme for farmers at the Krishi Mela in Dharwad on Friday
Karnataka Vikas Grameena (KVG) Bank has launched a new education loan scheme, designed exclusively for the children of farmers.
Chairman of KVG Bank C. Sambasiva Reddy launched the unique scheme aimed at helping farmers during the inauguration of the bank's stall at the four-day Krishi Mela being organised by the University of Agricultural Sciences (UAS), Dharwad.
Mr. Reddy said that under the new scheme, farmers would be able to mortgage their agricultural lands for getting education loans for their wards.
“Usually while applying for the education loans above Rs. 7.5 lakh, collateral securities such as NSC/KVP have to be provided or house/residential plots (non-agricultural land) should be mortgaged. Till recently, mortgaging of agricultural lands for education loans was not allowed,” he said.
Mr. Reddy said that the State Government had now enacted an amendment and given a green signal to accept agricultural land as collateral security for education loans.
“KVG Bank has designed a new education loan scheme, which suits the children of farmers who aspire to go for higher studies. The bank also issued directions to all its branches to encourage meritorious children of farmers,” he said.
Elaborating on the bank's initiative to reach more villages, Mr. Reddy said the bank's unique campaign, ‘Reaching towards farmers', was getting a good response. So far, the bank had covered more than 7,000 fresh farmers through the campaign, he said.
He said the bank's stall at the Krishi Mela aimed at sensitising farmers on various schemes. “Last year, over 3 lakh people visited the bank's stall and this year we expect more. Arrangements have been made to provide all the information to farmers at the stall itself,” he said.










Sunday, June 12, 2011

How to Apply for and Get an Education Loan

The public sector banks in India have a very good education loan scheme in place for students pursuing higher education in general and professional courses in particular. The loan is interest free for students (family annual income less than Rs 4.5 lakhs) in professional courses during college years and 1 year or 6 months after graduation. The rules and requirements are published on most if not all bank websites. Online registration facility and application form download are also available on the websites. Students, by understanding the rules and starting the online registration process, can get loans in a timely manner with recourse to head office loan cell when difficulties arise. They get to know necessary documents and may collect them prior to the first visit to the local bank branch nearest to their domicile. The branch managers will have to spend less time on each application and they will be also aware that the student knows the rules and requirements. Following step by step guide will help students to access this information and exercise their rights to get the loan.

Before CET Counseling
  1. Make a list of Public Sector Banks nearest to your family home and rank them starting with the nearest. It is also important to select bank that services your domicile.
  2. Go onto their Education Loan web page on the internet and print information about the bank’s education loan scheme, study it and understand the eligibility requirements, eligible expenses and conditions for various levels of loan amount. Check whether the bank has online application facility. List the phone numbers and names of the bank manager and the assistant division manager.
  3. Decide on amount of loan you need to complete your education. For example, for 4 years of engineering, with or without hostel, Rs. 4 lakhs or less is currently sufficient for most of the colleges in Karnataka. Understand the bank conditions for the loan amount you need. Conditions to look for are collateral security, third party guarantee, margin, interest rates and repayment period.
  4. Download the loan application form, print it and make list of documents needed to be attached to the application form.
  5. Collect as many needed documents as and when possible
At CET Counseling
  1. Talk to the bank loan kiosks at the CET counseling center and ask for education loan. Choose the bank nearest to your home if present at the center; otherwise go to the next one on your list prepared in step 1. Some banks will even give you a DD required for the payment of the fees at the counseling. Ask for loan amount you decided in step 3 or Rs 4 lakhs for engineering or more for medical or other courses. Get a letter from the bank officer at the counseling center that typically says that the loan is approved in principle.
After Final Selection of the College You Will Attend or After Admission
  1. Apply online on the bank website, if this facility is available. Make sure you print out the confirmation information after you complete the form. You will receive an email with the in principle approval in a short time, typically 7-10 days; you may get a phone call from some banks, ask and note down the name, phone number, and branch of the person and confirm the branch you need to go to apply for the loan in person.
  2. Get a letter of expenses and admission from the principal of the college you going to attend. Collect all the documents that are required with the education loan application from the list you made in step 4.
  3. Fill up the application form you printed in step 4.
  4. Submit the application and the required documents to the bank nearest to you. Get a written receipt of the application submission with a date stamp. Getting the receipt is the most important part of the application process. Once you have a written receipt, the bank loan officer is required to follow a well defined and time limited procedure and approve or disapprove the loan. If the bank officer does not cooperate, do not get discouraged. Politely and firmly insist on getting the receipt. Visit the bank multiple times if necessary.
  5. The bank officer may ask you to provide a third party guarantor or collateral security even if requested loan amount is less than Rs. 4 lakhs. Show the manager the printout from the bank website and politely tell him that neither is required if the requested loan is less than Rs 4 lakhs. Make sure that the bank officer knows the fact that you are only asking them to follow their own bank’s rules.
  6. If the bank is still not cooperating, call or email the head office contact you received when you completed online registration/application Seek out help of a prominent person in your community who may be able to help you with the bank manager.
  7. If that is not possible, talk to the assistant division manager of the bank and explain your situation and request him to help you with processing of the loan application.
  8. For more information please refer also to: http://action2020eltf.blogspot.com/
  9. If you are still having difficulties, email at appam@yahoo.com with your phone number and I will help you.

Friday, January 28, 2011

Education Loan Task Force (ELTF)

Another blog you can visit to get information about EDUCATION LOAN SCHEME


Education Loan Task Force (ELTF) is part of Action 2020 team of India Vision online group. ELTF was formed to guide highly deserving, poor students to avail the bank loans for higher education. Whenever Banks harass genuine deserving students, without following the RBI rules, ELTF will take up with higher authorities for solution. However ELTF will not undertake to get any loans from Banks. This is a voluntary group of youngsters to create awareness about the education loans in India.
contact email id action2020eltf@gmail.com

Education loan: bank flayed for demanding guarantee

THE HINDU
Online edition of India's National Newspaper
Sunday, Jan 09, 2011

Education loan: bank flayed for demanding guarantee
Mohamed Imranullah S.
MADURAI: The Central Information Commission (CIC) presided over by Information Commissioner Satyananda Mishra in New Delhi has criticised the Indian Bank for demanding securities and guarantee to provide education loan of Rs.4 lakh to a Chennai student who is right now undergoing a Master's programme costing Rs.22.87 lakh at the University of Texas in the United States.
Passing orders in a second appeal filed and argued by S. Dorairaj, the Madurai based 79-year-old uncle of the student, under the Right to Information Act, 2005 the CIC said: “What this case brings out is that the authorities in the bank have failed to show adequate sensitivity in sanctioning educational loan to a student such as Pratap Ramanathan.
“Contrary to the public pronouncements of the Central Government that the procedure for availing educational loan has been simplified and that students can access such loans without having to furnish securities etcetera, Pratap Ramanathan was asked to furnish both securities and guarantee for the loan and was compelled in the process to seek a reduced loan (from Rs.7 lakh to Rs. 4 lakh) for which also he was asked to furnish securities and guarantee.
“It does not look that the bank took any remedial action at any stage even though the loan applicant and his uncle had been seeking several information from the bank ever since. This also needs to be looked into by some appropriate authority in the bank so that such a situation does not recur.
“We direct the CPIO (Central Public Information Officer) to forward a copy of this order to the CMD (Chairman and Managing Director) of the bank for taking appropriate action on our directions. A compliance report must be sent to the CIC within two months from receiving this order.”
Discrepancies
The CIC also found that there were several discrepancies in the information provided by the public information officer as well as the appellate authority (Executive Director) of the bank in response to the applications filed by the student as well as his uncle under the RTI Act. “We verified some of the replies given by the CPIO at different times in response to the RTI requests made by the appellants and found that, indeed, the information provided by the CPIO had variations from time to time. This only shows that the CPIO concerned was not very careful in dealing with the request,” the CIC's order read.
Directing the CPIO to furnish all relevant records to Mr. Dorairaj within 15 days, the CIC went on to state: “This brings us to the question of some of the CPIOs providing incorrect information in their response to RTI requests on the subject in the past. During the hearing, we had specifically pointed out these discrepancies, as brought out by the appellants, to the respondents.
“They could not provide any satisfactory explanation since they did not have the relevant records with them at the time. This matter needs to be investigated in order to find out if the CPIO(s) concerned had provided the incorrect information knowingly.
Therefore, in exercise of the powers vested in the CIC in Section 20 (2) of the RTI Act, we direct the competent authority in the bank to enquire into this matter and to fix responsibility for the incorrect information sent to the appellant and to initiate appropriate disciplinary action if the lapse on the part of the CPIO(s) is found to be deliberate and wilful.”