Pudukkottai: The Finance Minister P Chidambaram has stated that more than 12 lakh students all over India have taken benefits of an education loan and the more than Rs. 16,000 crore were disbursed to the needy students. He disclosed this information while inaugurating the 1008th branch of Vijaya Bank Rangiyam in Tirumayam taluka. The Minister praised the bank's efforts towards achieving fast growth and expansion of its branch network.
Making the education loans accessible to a wide section of students has been one of the priority areas of Government of India and it has taken many steps in this regard. One of the major hurdles faced by students, especially the poor ones is the collateral and co-applicant clause attached with education loans in India. Since, a student who applies for an education loan in India has little or no income, banks more or less ask for a co-applicant with suitable repayment capacity to stand as the guarantor for the loan.
In case the loan amount exceeds Rs. 4 lakhs ( for most banks), a collateral is also demanded by banks. It can be anything like property, fixed deposits or any other instrument, which the banks find suitable. Poor students generally are not able to provide these and therefore are denied an education loan. Government of India (GOI) has asked the banks and lending institutions to do away with these collateral and co-applicant requirements for education loans.
GOI has also proposed to set up an authority called the Higher Education Loan Guarantee Authority (HELGA), which will take care of the interest rate payments of education loan during the moratorium periods. It will also devise means to help the needy and students from deprived section of the society to avail education loans in a hassle free manner.
The Ministry of Human Resource Development (MHRD) has also proposed a special scheme, which will provide education loans to students belonging to poor sections of the society at a subsidized interest rate of 4 percent. Students who belong to families, which have a total family income below Rs. 2.5 lakh per annum can avail this loan. There will be no caste considerations in this scheme and the education loans will be available to all the needy students. Currently, education loans carry an interest rate of around 12 percent. Expecting to cost the exchequer a sum of Rs. 3,250 crore over the 11th five year plan this scheme will be offered only on professional courses of both government and private recognized universities and institutions. GOI will act as the guarantor for the loan and so there will be no need for any collateral or co-applicant.
The Reserve Bank of India has also reduced the risk weightage on education loans to 75 percent from 125 percent, which will increase the availability of funds for education loans. Though, it won't bring down the interest rates on education loans immediately, but students will be able to get education loans more easily.