Indian Banks’ Association has formulated Model Education Loan Scheme to be adopted by its member banks for providing financial support from the banking system to meritorious students for pursuing higher education in India and abroad. The scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank will have the discretion to make changes as deemed fit.

 State Bank of India (SBI) has informed that at present, there are no income based flexible EMIs in education loans. However, extension in moratorium period and extension of loan tenure is permitted as per the provisions of the Education Loan Scheme framed by the Indian Bank Association.

 As per the information furnished by SBI, there is no instance where the cases have been filed before Lok Adalat within few months of default. However, in case of chronic defaults, SBI give an offer to the borrowers to settle the case on mutually agreed terms through Lok Adalat.

 This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha.

Educational loan scheme guidelines allow moratorium and tenure extensions; chronic defaults may be settled via alternative dispute forum. The Model Education Loan Scheme gives banks broad operational guidelines while allowing implementing banks discretion to adapt terms. The scheme currently lacks income based flexible EMI options, but permits moratorium period extensions and loan tenure extensions. Banks report they do not typically pursue settlement in alternative dispute forums immediately after default; chronic defaults may be offered settlement on mutually agreed terms through alternative dispute resolution.