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NEW DELHI: Faced with growing education loan default, Credit Guarantee Fund Scheme for Educational Loans has been finalized and is likely to come before the Cabinet in the next few weeks.
The scheme, devised by the ministry of finance, HRD ministry and Indian Banks' Association, proposes to set up a Credit Guarantee Fund with a corpus of Rs 2,500 crore. The fund will provide guarantee to educational loans up to Rs 7.5 lakh. It is proposed that loans — ranging from Rs 4 to Rs 7.5 lakh — will be guaranteed up to 75% of the amount outstanding with interest as on the date the account is declared non- performing asset (NPA). A HRD official said, "Earlier, it was proposed that loan up to Rs 4 lakh may be guaranteed up to 90% of the outstanding amount and loans up to Rs 7.5 lakh may be guaranteed up to 80%. But a uniform guarantee percentage was devised later. It is up to the Cabinet to revise the amount that can be guaranteed."
The fund will not apply to educational loan amount above Rs 7.5 lakh as they are given through appropriate collateral.
A HRD official said, "The new scheme helps banks with guarantee. It will encourage them to lend more and bring down the interest rate because of guarantee." It has also been specified that eligibility for guarantee be only for those loans in which interest does not exceed more than 2% of the base lending rate. Banks giving out education loans will have to pay a one-time guarantee at a specified rate upfront to the Credit Guarantee Fund Trust within 30 days from the date of first disbursement of education loan or 30 days from the date of demand advice of guarantee fee whichever is later or such date as specified by the Trust.
Once the guaranteed amount is paid to the bank, the borrower becomes a debtor of the government. While the banks will continue to follow up for repayment of the loan and share with the government recoveries proportionally, the government will also track the students and recover their own dues. Loan amounts will be reported to the Credit Information Company. The total outstanding education loan amount at the end of March, 2013, was Rs 53,520 crore. In total, there are more than 25 lakh education loan accounts.
http://timesofindia.indiatimes.com/home/education/news/Now-scheme-to-curb-default-on-educational-loans/articleshow/25665584.cms
The scheme, devised by the ministry of finance, HRD ministry and Indian Banks' Association, proposes to set up a Credit Guarantee Fund with a corpus of Rs 2,500 crore. The fund will provide guarantee to educational loans up to Rs 7.5 lakh. It is proposed that loans — ranging from Rs 4 to Rs 7.5 lakh — will be guaranteed up to 75% of the amount outstanding with interest as on the date the account is declared non- performing asset (NPA). A HRD official said, "Earlier, it was proposed that loan up to Rs 4 lakh may be guaranteed up to 90% of the outstanding amount and loans up to Rs 7.5 lakh may be guaranteed up to 80%. But a uniform guarantee percentage was devised later. It is up to the Cabinet to revise the amount that can be guaranteed."
The fund will not apply to educational loan amount above Rs 7.5 lakh as they are given through appropriate collateral.
A HRD official said, "The new scheme helps banks with guarantee. It will encourage them to lend more and bring down the interest rate because of guarantee." It has also been specified that eligibility for guarantee be only for those loans in which interest does not exceed more than 2% of the base lending rate. Banks giving out education loans will have to pay a one-time guarantee at a specified rate upfront to the Credit Guarantee Fund Trust within 30 days from the date of first disbursement of education loan or 30 days from the date of demand advice of guarantee fee whichever is later or such date as specified by the Trust.
Once the guaranteed amount is paid to the bank, the borrower becomes a debtor of the government. While the banks will continue to follow up for repayment of the loan and share with the government recoveries proportionally, the government will also track the students and recover their own dues. Loan amounts will be reported to the Credit Information Company. The total outstanding education loan amount at the end of March, 2013, was Rs 53,520 crore. In total, there are more than 25 lakh education loan accounts.
http://timesofindia.indiatimes.com/home/education/news/Now-scheme-to-curb-default-on-educational-loans/articleshow/25665584.cms
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