Wednesday, June 29, 2011

Bank loans for professional and technical education courses in India

Few years back, the government educational institutes were the only refuge to attain good education for talented but financially weak students. At present, even Govt. institutions are beyond the reach of students of such categories due to steep fee hikes by the Govt. Colleges and tough competition among students to get admission to these institutions. The only recourse left to such students is to seek loan either from public or private financial institutions or qualify for a scholarship sponsored by a charirty trust or private companies. General information for eligibility, period, amount of loan and financial institutions providing education loan is given here. Indian students have to secure admission in an institute of good repute to become eligible for such loans. Loans are granted by banks mainly for higher education but few banks are providing financial assisttance for schooling also. The private colleges and universities should be recognized by the competent government authority/body. For some courses, expenditure on education is reimbursed to the extent of 100% and for some courses this amount may vary. Margin ranges from 5-15 % for courses in India & Abroad. A repayment holiday is available for select courses. Repayment holiday would be for the course period and a period ranging from 6 months to one year after the student gets a job. Students or their parents have to pay the Interest during the moratorium. The interest charged is simple interest calculated on the loan amount disbursed payable monthly. Customers who have the bank account in the same bank have several options to pay. They can issue either Standing instructions for payment from their respective account to loan account or they can pay through post dated cheques. Maximum tenure of the loan can be 7 years (including moratarium period). This period will also vary from bank to bank. A co-applicant is required for all Full-Time courses . The co-applicant can be parents, siblings, spouse or Family Relative . Loan eligiblity is determined based on the co-applicant's income. However, no no Co-applicant is required in case of part time courses. Collaterals are not required for loan amount below Rs 7.5 lakh but for educational Loans above Rs.7.5 lakhs there is need of Collaterals. The acceptable collaterals are either in the form of fixed deposits or the residential property. Tution & hostel fee are disbursed directly to the educational Institute. Progress reports are to be provided at the time of every disbursement tranch. Anyone in the age group of 16-35 years can take this loan. The expenses covered by the loan include fee Payable to College/School/Hostel, exam/library/lab fees, caution deposit, refundable deposit and building fund etc. However, all the expenditure must be supported by Institution bills/receipts. In addition to these, travel expenses/passage money for studies abroad are also covered. Some courses require purchase of computers and if essential for completion of the course, this is also financed.

Comprehensive Educational Loan Scheme

Government of India in consultation with Reserve Bank of India (RBI) and Indian Banker's Association (IBA) has framed a Comprehensive Educational Loan Scheme to ensure that no deserving student in the Country is deprived of higher education for want of finances. The new scheme covers all type of courses including professional courses in schools and colleges in India and abroad.

The Salient features:

The scheme envisages loans up to Rs.7.5 lakh for studies in India and up to Rs. 15 lakh for studies abroad. For loans up to Rs. 4 lakh no collateral or margin is required and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent. The loans are to be repaid over a period of 5 to 7 years with provision of grace period of one year after completion of studies

Tax Benefit

Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest).

Only loans taken for higher education - fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses - may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying.

Formation of Education Finance Corporation

Central Government is planning to form a Corporation to provide poor students, belonging to middle class, education loan @ 8% for a period of 20-25 years. Central Govt. will act as a guarantor. As per HRD minister Mr Kapil Sibal, all the degrees in the future will be changed to demat form. When a student joins any firm, it will be responsibility of the firm to deduct the loan installment from the salary of the student or employed youth.

Loan Quantum:

For loans with Moratorium :

Studying in India - Max Rs. 10 Lakhs

Studying abroad - Max Rs. 20 Lakhs

For Loans without Moratorium :

Studying in India - Max Rs. 7.50 Lakhs

Studying abroad - Max Rs. 10 Lakhs

Documents to be furnished

  • Declaration/Affidavit confirming that no loan has been availed from other Bank/Institution
  • Completely filled Application Form with Photographs.
  • Letter of admission from the Institute
  • Letter from the Institute stating cost break up of the program (term-wise, year-wise)
  • Marksheets from SSC onwards till the latest examination passed
  • KYC Documents for the Applicant & Co-applicant (Residence Proof , ID Proof , Signature Verfication Proof , Age proof )
  • Income Documents of the Co-applicant ( Pay Slips / ITR copy etc )
  • Declaration/Affidavit confirming that no loan has been availed from other Bank/Institution

In addition to the above list of documents, the following documents have to be furnished for studies abroad:

  • Letter from the Head Of Department ( University)
  • Visa approval papers
  • Travel papers
  • GMAT/GRE/SAT score
  • I-20 in case of applicant going to the USA

Documents to be submitted after the sanction of the loan:

  • Education Loan Agreement
  • SI/ECS Mandate as applicable
  • Post Dated Security Cheques as per Policy
  • Any other documents which might be required as per policy.

Major Banks providing education loans:

1. State Bank of India:

Interest Rates effective from 12.8.2008

For loans up to Rs.4 lacs - 0.50% below SBAR i.e.13.25% p.a. Floating

For loans above Rs. 4 lacs and upto Rs.7.50 lacs - 1.00% above SBAR 14.75 % Floating

For loans above Rs.7.50 lacs - SBAR - 13.75% p.a. Floating

2. Allahabad Bank:

Current Rate of Interest: for Loan Upto Rs. 4.00 lacs:

For students of IIT / IIM/ ISB - PLR-1.75%

For Others PLR-0.75%

Loan above Rs. 4.00 lacs

For students of IIT / IIM/ ISB PLR-1.75%

For Others PLR-1.00%

Girl students may be provided a special relief of 1.00% in all cases as above.

3. Punjab National Bank:

Upto Rs. 4 lacs BPLR - 1.50%

Above Rs.4 lacs BPLR - 0.75%

Term premia of 0.50% p.a. shall be added for repayment period of 3 years & above.

The interest shall be debited monthly on simple basis during the Repayment holiday/ Moratorium period.

Penal Interest upto Rs. 25000/ - NIL and above 25000/- @ 2% be charged on the outstanding amount for overdue period.

1% Interest concession for servicing of interest during the study period regularly is allowed at the time of start of repayment period of loan.

4. Bank of Baroda:

Bank of Baroda provides three types of education loan namely 1) Baroda Vidya - for Class Nursery to class XII, 2) Baroda Gyan - All graduation, post graduation and doctorate courses, 3) Baroda Scholar - Graduate/Post Graduate / Doctorate / Job Oriented Professional / Technical Courses offered by reputed Universities overseas. Regular Degree/ Diploma courses like Aeronautical, pilot training, shipping etc. The Institute should be recognized by the competent local aviation / shipping authority and Director General of Civil Aviation/shipping in India.

Loans upto Rs.4.00 lacs : 2.00% below BPLR i.e. 12.00%

Loans above Rs.4.00 lacs : At BPLR i.e. 14.00%

5. UCO Bank:

Upto Rs.4 lacs – BPLR – 1.00% i.e. 13.50 % p.a.

Above Rs.4 lacs – BPLR - 0.50% i.e. 14.00% p.a.

6. Corporation Bank:

With effect from 11th August, 2008 as follows :

Upto Rs.7.5 lakh : 12.25%

Above Rs.7.5 lakh

(Secured) : 11.50%

Unsecured : 12.25%

Simple interest to be charged during the Repayment holiday/Moratorium period

1% interest concession may be provided for loanees if the interest is serviced as and when debited.

Broadly speaking, students admitted in the following courses qualify to apply for a loan.

Management Courses - PostGraduation

Engineering Courses - Graduation

Medicine - Graducation / Post Graducation

Computer Application ( MCA/MCM) - Post Graduation

Commercial Pilot License courses from Flying Schools approved by DGCA in India or an Equivalent approving body abroad.

Online / Distance Learning courses.

Fine Arts and Designing - Graduation / Post Graduation

Architecture - Graduation

Hotel and Hospitality - Graduation / Post Graduation

Agriculture - Post Graduation

Pure Science - Graduation / Post Graduation


Courses such as SAP , ERP , GNIIT , Air Hostess Training programmes etc.

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Terms an conditions including interestrates, quantum and other requiremens are revised from time to time by banks, students or their parents are advised to visit the sites of individual banks. Information provided in this site is just to provide guidance.

  • Allahabad Bank

    Educational Loan Scheme Application form

  • Andhra Bank

    Educational Loan Scheme Application form

  • Bank of Baroda

    BOB Scholar Application form

  • Bank of India

    Vidya Vardhini Application Form

  • Bank of Maharashtra

    Educational Loan SchemeApplication Form

  • Canara Bank

    Vidyasagar Loan Application Form

  • Central Bank of India

    CentvidhyarathApplication Form

  • Corporation Bank

    Educational Loan Scheme Application Form

  • Dena Bank

    Dena Vidya Laxmi Application Form

  • Indian Bank

    Educational Loan Scheme Application Form

  • Indian Overseas Bank

    Vidya Jothi Application form

  • Oriental bank of Commerce

    Educational Loan Scheme Application Form

  • Panjab and Sindh Bank

    Educational Loan Scheme Application From

  • Panjab National Bank

    Vidyalaksyapurti Application Form

  • State Bank of India

    Educational Loan Scheme Application Form

  • State Bank of Bikaner and Jaipur

    Educational Loan Scheme Application Form

  • State Bank of Hyderabad

    Educational Loan Scheme Application form

  • State Bank of Indore

  • State Bank of Mysore

    Educational Loan Scheme Application form

  • State Bank of Saurashatra

    Educational Loan Scheme Application form

  • State Bank of Travancore

    Gyan Jyothi Application Form

  • Syndicate Bank

    SyndVidya Application Form

  • UCO Bank

    Educational loan Scheme

  • Union Bank of India

    SyndVidya Application Form

  • United Bank of India

    Educational loan Scheme Application Form

  • Vijaya Bank

    Education Loan Scheme Application Form

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