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Banking > Articles> Educational Loan Scheme

Educational Loan Scheme

The Reserve Bank of India has evolved an educational loan scheme to facilitate financial assistance to students seeking admission to private professional colleges to pursue the full time graduate/post-graduate courses.The scheme is effective from August 1,1999. All public sector
banks have been directed by RBI to provide educational loans to students who fulfil certain eligibility criteria.

RBI has identified following disciplines:
i. medical and dental (all branches such as allopathy, ayurvedic, homoeopathy, unani)
ii. engineering
iii. chemical technology
iv. management
v. architecture including interior decoration
vi. law
vii. computer science and applications

Eligibility criteria:

(i) Student should have secured admission in private professional college
against either free/merit or payment seat. Student will have to submit a certificate to this effect from the principal / competent authority of the college concerned. The college should be affiliated to a university in the country and the course should be recognised by the concerned governing body, such as, Indian Medical Council, etc.
(ii) Student's annual family income (or that of his father or guardian) should not exceed Rs.1 lakh from all sources. An affidavit to this effect will have to be furnished by the student and his father and in the absence of the father, by mother or other near relative.
(iii) Students who have secured admission against quota of seats meant for NRI/foreign students will not be eligible for assistance under the scheme.

Loan amount: Rs. 15,000 for free/merit seat student and Rs.50,000/- for payment seat students, or the fees payable by the student, whichever is less.

Interest: The rate of interest charged under the scheme will in no event exceed 12 per cent per annum.

Security : The advances in this case will be on clean basis.

Repayment: Repayment of the loan will commence immediately after two years of completion of the course the student is studying in or six months after the student borrower has secured employment and starts earning, whichever is earlier. The total period for repayment including the above period of two years or six months, as the case may be, should not exceed five years from the date of completion of the course by the student.

A bond undertaking to repay the loan amount in the stipulated manner will have to be executed by the student and in case the student is minor, by his father/mother or the guardian.

Student will have to submit a certificate every year from the college authorities regarding fees payable by him. Loan amount will be remitted by the lending bank to the college concerned. Loan granted in each academic year may be treated as a separate loan account for determining rate of
interest, security, etc.

The assistance from the bank should be available to the student for the entire duration of the course. The student will not be required to submit a fresh application for loan every year but will only submit to the bank proof of his continuing to fulfill the eligibility criteria.

However the objective of the scheme to provide financial assistance by way of loans to the meritorious and indigent students in order to encourage them to pursue the full time graduate/post- graduate professional courses in private professional colleges for developing the technical skills will be fulfilled only if the banks implement it properly.

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