1. Concept and Meaning of Education Loan Scheme
The Education Loan Scheme is a structured financial product provided by banks to support students in pursuing higher education without immediate financial burden. It is a retail lending product and also falls under Priority Sector Lending.
- Retail Lending Segment
- Priority Sector Lending (PSL)
- Secured/Unsecured Loan depending on amount
2. Objectives of Education Loan Scheme
- Financial inclusion in education
- Support for professional and technical courses
- Skill development and employment generation
- Economic and social development
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3. Eligibility Criteria
Student Eligibility
- Must be an Indian citizen
- Admission through merit or entrance test
Course Eligibility
- Recognized institutions only
- Job-oriented courses
Co-Borrower
- Parent/guardian mandatory
- Joint liability in repayment
4. Courses Covered
Studies in India
- Graduation and Post-Graduation
- Engineering, Medical, MBA
- CA, ICWA and professional courses
- Government recognized diploma courses
Studies Abroad
- Professional and technical courses
- Graduation/Post-Graduation
- Recognized international universities
5. Expenses Covered
- Tuition Fees
- Hostel Charges
- Books and Equipment
- Travel expenses (abroad)
- Insurance premium
- Caution deposit (within limits)
6. Loan Amount Limits
| Category | Maximum Limit |
|---|---|
| Studies in India | ₹10 lakh |
| Studies Abroad | ₹20 lakh |
7. Margin Requirement
| Loan Amount | Margin |
|---|---|
| Up to ₹4 lakh | Nil |
| Above ₹4 lakh (India) | 5% |
| Above ₹4 lakh (Abroad) | 15% |
8. Security Norms
| Loan Amount | Security |
|---|---|
| Up to ₹4 lakh | No collateral |
| ₹4–7.5 lakh | Third-party guarantee |
| Above ₹7.5 lakh | Tangible collateral |
9. Interest Rate Structure
- Linked to Repo Rate / EBLR / RLLR
- Simple interest during moratorium
- Compound interest after repayment starts
- Concession for female students and premier institutes
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10. Moratorium Period
- Course period + 1 year
- OR 6 months after employment
11. Repayment Period
- Maximum 15 years
- EMI starts after moratorium
12. Subsidy Scheme
Central Sector Interest Subsidy Scheme (CSIS)
- Income limit: ₹4.5 lakh per annum
- Interest subsidy during moratorium
- Applicable for loans up to ₹7.5 lakh
13. Priority Sector Lending (PSL)
- Education loans up to ₹20 lakh fall under PSL
- Helps banks achieve PSL targets
14. Documentation Required
- Admission letter
- Fee structure
- Academic records
- KYC documents
- Income proof
- Collateral documents (if applicable)
15. Loan Appraisal Process
- Application submission
- Credit appraisal
- Loan sanction
- Disbursement (stage-wise)
16. Repayment Mechanism
- Interest accrues during moratorium
- EMI starts after moratorium
17. NPA Classification
- Loan becomes NPA if overdue > 90 days
- Counting starts after moratorium
18. Risk Factors
- Credit Risk
- Employment Risk
- Migration Risk
19. Common Exam Mistakes
- Confusion in margin percentages
- Ignoring moratorium concept
- Mixing PSL and loan limits
20. Case Example
Loan: ₹12 lakh (India)
- Margin: 5% = ₹60,000
- Loan sanctioned: ₹11.4 lakh
- Security required (above ₹7.5 lakh)
- Moratorium: Course + 1 year
Exam Key Points
- Loan Limits: ₹10 lakh / ₹20 lakh
- Margin: Nil / 5% / 15%
- Moratorium: Course + 1 year
- PSL Limit: ₹20 lakh
- Subsidy Income Limit: ₹4.5 lakh
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