Press Information Bureau

Government of India

Ministry of Finance

07-December-2012 18:35 IST

As per directions of Reserve Bank of India, with effect from 1st July, 2010, banks are required to price their loan products including education loans linked with the base rates approved by their respective Boards. Banks are not permitted to resort to any lending below the Base Rates. Accordingly, interest rates on education loans are decided by the bank concerned as per their approved policy.

In order to provide relief to the students, the Model Education Loan Scheme of Indian Banks’ Association (IBA) provides for certain concessions on educational loans which inter-alia includes:

• Simple interest is charged during the study period and upto commencement of repayment;

• 1% interest concession provided by the banks, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment;

• 0.5% concession in interest rates is provided for the girl students;

• Full interest subsidy has been made available for educational loans disbursed on or after 1st April, 2009 during the period of moratorium for the students belonging to economically weaker sections from scheduled banks under ‘Interest Subsidy’ scheme of Ministry of Human Resource Development

This was stated by the Minister of State for Finance, Shri Namo Narian Meena in a written reply to a question in the Lok Sabha today.

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DSM/RS/ka

Base rate requirement: banks must price education loans at or above base rates, with specified borrower concessions. Banks must price education loans at or above their board approved base rates, with each bank deciding rates under its approved policy. The Model Education Loan Scheme provides borrower relief: simple interest during study and moratorium, a 1% concession if interest is serviced during study and moratorium, a 0.5% concession for girl students, and a full moratorium interest subsidy for economically weaker students under the designated subsidy scheme.