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RETAIL ASSET PRODUCTS | EDUCATIONAL LOANS | CAIIB RETAIL BANKING 2022

CAIIB RETAIL BANKING MODULE B CONCEPT – RETAIL ASSET PRODUCTS: EDUCATIONAL LOANS 

Free short notes on Retail Asset Products i.e Educational Loans from the CAIIB 2022 Syllabus for CAIIB Exams preparation in 2022. In this article, you read about the educational loans which are provided by the Retail Bank Branches from CAIIB Retail Banking Paper from the prescribed CAIIB exams.

Dear Future CAIIBs!!

We hope that you have registered for the June examinations of IIBF CAIIB. The exam dates are getting nearer & only unlimited time is left for the preparation of certified associate of Indian Institute of Bankers papers. 

This is one of the exams of IIBF which is considered to be the most difficult course & its syllabus is also prescribed by IIBF.

But for CAIIB candidates who have studied from the CAIIB Study Material provided by learning sessions, do not believe the same. Learning sessions is one of the leading and trusted platforms known to provide CAIIB’s best study material 2022. 

CAIIB exams are administered twice in a year for the Candidates desiring to write these papers. If you also want to write CAIIB, you should complete JAIIB first & then register for CAIIB Exam 2022. In this article, we will provide you with detailed notes of one unit from Module B of Retail Banking study material on Educational Loans as per the latest syllabus.

So, here we are providing Retail Asset products: Educational Loans from Module B: Retail Products from prescribed Syllabus of the Elective Paper: CAIIB Retail Banking 2022.

Read Also: DELIVERY CHANNELS | RETAIL BANKING FREE NOTES

The types of Loans provided under Retail Banking:

  1. Home loan
  2. Personal loan
  3. Educational loan
  4. Vehicles loan

RETAIL ASSET PRODUCTS: EDUCATIONAL LOANS 

NO. PARTICULARS FEATURES
1. Eligibility Students studying in Professional or Other Colleges can avail Education Loans.

A Model Educational Loan Scheme has been brought out by Indian Banks’ Association prescribing the modalities required to be followed by banks in regard to disbursement of educational loans. The objective of IBA is to make the banks adopt a uniform approach as per the guidelines of IBA in respect to:

  1. Amount of loan, 
  2. purposes, 
  3. approval requirements of colleges, 
  4. security prescriptions.

Loans are required to be given jointly to the student and their parent(s).

2. Purpose These loans are to be pursued for professional degree or diploma and other course as prescribed in the IBA guidelines whether for:
  1. studies in India or 
  2. studies in abroad.
3. Amounts For Inland Studies (domestic) = Upto Rs.10,00,000.00

For Foreign Studies = Upto Rs. 20,00,000.00

In case more the amount is required, the same can be considered by banks on a case to case basis of the applicants.

4. Security For loans Upto Rs. 4,00,000.00 – No security is required.

For loans ranging from Rs. 4,00,000.00 to Rs. 7,50,000.00 while Additional Personal Guarantee will be required worth the amount.

For loans > Rs. 7,50,000.00 – they are required to be secured by tangible asset to cover the loan amount (it could be in the form of property or Govt. Securities such as NSC, KVP etc.)

5. Disbursement The loan will be disbursed in stages i.e 
  1. semester wise or 
  2. annual payments 

as per the requirements of the institutions fee requirements & the payments will be made to the institution directly.

6. Moratorium Students will also get 1 year moratorium period after completion of their studies or employment, whichever is earlier.
7. Prepayment issues No prepayment charges will be taken on educational loans.

But generally pre-payment does not happen in Educational Loans because the repayment is fixed only after completion of the studies & revenue streams for pre-payment are very rare.

Although parents always have the option to service the interest whenever it is due and if interest is serviced, Tax Exemption for interest serviced is available.

There are some banks which offer Interest Rebate of upto 1% when loan are repaid promptly.

8. Repayments These loans are usually repayable in 60 monthly instalments of equal amounts (EMIs) after the moratorium period is over as prescribed above (1 year).

 

HOW RETAIL LOANS ARE PROCESSED?

Banks must make retail loans available quickly and make the procedures easy for their customers in order to succeed in retail asset expansion. The loan process is handled differently by banks. Some of the important models of retail loans processing are explained:

Read Also: RETAIL LOANS | DEFAULTS, RESCHEDULING, AND RECOVERY PROCESS

  1. Stand Alone Model: Stand-alone model for retail loan processing can be defined as the processing of retail loans at the branch level on independent basis. On the basis of the discretionary powers of Branch Head, Branch can market its retail loans and thereby process and sanction the loans after checking the applicant’s eligibility. Obtention of the needed documents, appraisal of the proposal & sanction of the loans are independently at the branch level rather than at the head offices i.e all the valuations, legal opinion etc, are obtained at the branch level via approved panel valuers/lawyers.
  2. Centralised Model: Centralised Model for Retail Loans processing means processing of loans is done at a centralised place depending upon the geography of branches. Banks adopt various centralised models to process the retail loans. Some of the names which different banks have given to these retail loans processing centres are mentioned as below:
  • Retail Loan Factory
  • Retail Loan Hub
  • Retail Loan Processing Centres
  • Retail Asset Processing Centres
  • Retail Loan Branches

DIFFERENCE BETWEEN STANDALONE MODEL & CENTRALIZED MODEL

 NO. STANDALONE MODEL

(BRAND LEVEL PROCESSING)

CENTRALIZED MODEL

(RETAIL LOAN PROCESSING HUBS OR CENTRES)

1. Provides Better Understanding of the requirements of customers. It is totally based on documents only.
2. It follows no standardised approach It follows a Standardised approach.
3. Retail Loans are only a part of the multiple activities. Retail Loans are Exclusively done or performed and hence will be more faster & professional in approach.
4. Difference in quality of appraisal is based on the branch & its personnel. Processing time may differ based on the priorities of the Standalone model branches and importance of the customers and / or proposals. Because the activity is exclusive its Quality remains uniform.
5. Compliance of appraisal norms may be biased because it is based on the profile of customers. Processing time will be uniform for all the activities and will be based on fixed Turn Around Time (TAT) for different retail loans
6. Documentation standards followed under a standalone model may not be uniform. It follows Uniform & impersonal appraisal standards.
7. It has specific Professional documentation standards.

 

Read Also: RETAIL vs WHOLESALE BANKING

So, the above scheme & loans are processed by Retail Banks through either of the above models. 

If you liked the above notes on retail banking, we assure you that you will find the Study Material prepared by Learning Sessions’ Faculty on CAIIB’s retail as well as its ABM & BFM Exams very understandable & easy to use. 

You can avail the CAIIB Study Material Video course at heavy discount from here:

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