The Indian Banks’ Association (IBA) has come up with an idea of a model education loan scheme which involves a higher increase in loan. Though this scheme will be more expensive, lending standards are due to become tighter for loans for overseas education.
Under this scheme Public sector banks will be offering insurance-linked education loans. The insurance premium will be a part of the expenses for the loan.
Under the scheme the loan limit has been increased from Rs 7.5 lakh to Rs 10 lakh for studies in India and from Rs 15 lakh to Rs 20 lakh for studies overseas. Addition to this, there will be a provision of top-up loan for students for further studies. A limit of sorts has been fixed for the cost of such loans — the rate of interest have to be within the benchmark prime lending rate (BPLR) for loans up to Rs 4 lakh. And for loans over this limit, the rate of interest should not be more than 100 basis points over the BPLR.
Moreover some banks including the State Bank of Hyderabad and the Union Bank of India are providing educational loans at special rates of interests for girl students.
Under the scheme, life policies and mutual fund units will now be as allowed security for the loan. Banks will be able to lend multiple loans to a single family. Education loans will now be given for aeronautical engineering, pilot training, and shipping training as part of eligible courses.
The loans for overseas education the norms will be stiffer. For loans between Rs 4 lakh to Rs 7.5 lakh, banks will entail more restrictive security by including co-obligation of parents. A banker said this has been done due to rising NPAs in this segment, when parents claimed that they were not responsible for the loan repayments of their wards.
Also, banks will now charge upfront, the processing fees for education loans for studies abroad. Banks will be issuing a unique identification number or an identity card for loans for studies overseas.
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