Credit Guarantee Fund Scheme for Education Loans (CGFEL)

Central Government on 01.04.2019 announced Credit Guarantee Fund Scheme for Education Loan (CGFSEL) to provide a guarantee for education loans under the Model Education Loan Scheme of Indian Banks' Association.

Education Loans up to Rs. 4 lakh are collateral-free but under this scheme, a student can avail an education loan up to Rs. 7.5 Lakhs without any collateral and a third-party guarantee. However, if there is a requirement to revise the loan limit, the fund has the right to do so. Disbursal of an education loan under this scheme is comparatively simple.

There will be a maximum of up to 2% interest rate over the base rate and if the interest rate is above that, then that education loan will fall outside the mandate of CGFSEL. However, this may change with respect to the prevalent interest rate scenario, base rates of Bank and RBI's Credit Policies.

Margin to sanction loan

Up to INR 4 Lakhs - Nil
Above INR 4 Lakhs- 5% for study in India and 15% for study abroad

Education Loans covered under this scheme

The following Education loans will be considered eligible under this scheme:

The loans that are given by the bank to an eligible borrower according to the scheme of Indian Banks Association (IBA) without any collateral security and third-party guarantee. They must be in an agreement with National Credit Guarantee Trustee Company( NCGTC). The procedures prescribed by NCGTC must be followed and the guarantee cover in respect of education will be applied by the bank.

Loans that are disbursed in a quarterly manner prior to the expiry of the following quarter are eligible for the application of guarantee cover in respect of education loan by the Banks like PNB, Axis Bank, HDFC, etc.

"Material Date" basically means the date on which the guarantee fee, which has been covered previously in respect of the eligible borrower, becomes payable by the Bank to the respective trust. On the material date, the following criteria should satisfy:

Overdue in respect of the account to the banks should not be there and in the books of the bank, the loan should not be classified as an NPA (Non-Performing Asset). An asset is classified as a non-performing asset on the basis of the guidelines given by the RBI (Reserve Bank of India).

The purpose for which the loan has been granted to the borrower should not have been ceased.

Without obtaining any consent from the NCGTC, the credit facility should not be utilized for adjustments of any debts.

There will be a list of educational institutes and their courses or the categories of educational institutes for which the guarantee cover will be available.

Education Loans NOT covered under CGFEL scheme

The following Education loans will not be considered eligible under this scheme:

Any Education Loan which is inconsistent in any way and does not follow the provisions, laws, and instructions issued by the central government or the Reserve Bank of India.

If an Education Loan is sanctioned by the bank with an interest rate of more than 2% over the base rate of the banks.

A case where the risks are additionally covered by the Government or any external authority.

Press Information Bureau Government of India Ministry of Finance published information on 24.06.2019 regarding Education Loans.

The Information is as under:

The Reserve Bank of India (RBI) has advised all Scheduled Commercial Banks to adopt Education Loan Scheme, formulated by Indian Banks' Association (IBA), vide Circular RPCD.PLNFS. BC. NO.83/06.12.05/2000-01 dated April 28,2001.

IBA has formulated and circulated to all Member Banks including State Bank of India (SBI) a 'Model Education Loan Scheme' for providing financial support to meritorious students for pursuing higher education in India and abroad. Salient features of the Scheme inter-alia include;

- Loan upto Rs 10 lakh for study in India and upto Rs 20 lakh for studyabroad.

- Collateral free loans upto Rs 7.5 Lakh under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).

- No Margin for loan up to Rs 7.50Lakh.

- Repayment period of 15years

- One Year Moratorium for repayment after completion of studies in allcases, Moratorium taking into account spells of unemployment/under-employment, say two or three times during the life cycle of the loan Moratorium for the incubation period if the student wants to take up a start-up venture after graduation.

The IBA scheme provides broad guidelines to the banks to operationalise the Educational Loan Scheme. However, the implementing banks may vary their products as may be required.

As per IBA Model Scheme, approved courses leading to Graduate/Post-Graduate Degree and P G Diploma conducted by Colleges/Universities recognized by the University Grants Commission (UGC), the All India Council for Technical Education (AICTE), the Indian Council of Medical Research (ICMR), etc. are eligible for education loan.

SBI and other Nationalised Banks are granting education loan for Post-Graduation Diploma Courses conducted by the colleges and approved by AICTE without any discrimination.

As per the information furnished by SBI, the State-Wise Education Loan sanctioned and disbursed by SBI for pursuing Degree and Diploma Courses inside and outside the country during each of the last three years and the current year are at Annexure I &II.

This was stated by the Union Minister of Finance & Corporate Affairs, Smt. Nirmala Sitharaman in a written reply to a question in Lok Sabha on 24.06.2019.

Credit Guarantee Fund Scheme for Education Loans (CGFEL)

Education Loans covered under this scheme

Education Loans NOT covered under CGFEL scheme

Pradhan Mantri Yojana