Objective of education loan given by banks
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Educational Loan Scheme
The Finance Minister in a meeting with the Chief Executives of the public sector banks on 13 June 2000 had highlighted the role of commercial banks in facilitating pursuit of higher education by poor, but meritorious students. In pursuance thereof the Indian Banks’ Association constituted a Study Group under the chairmanship of Shri R.J.Kamath, Chairman and Managing Director of Canara Bank to examine the issue in detail. Based on the recommendations of the Study Group, a comprehensive model educational loan scheme was prepared by the Indian Banks’ Association for adoption by all banks. The Scheme aims at providing financial support from the banking system to deserving/meritorious students for pursuing higher education in India and abroad.The scheme was announced in the Union Budget for 2001-2002 and discussed in the meeting the Finance Minister had with the Chief Executives of banks on 7 April 2001.
2. Government of India, Ministry of Finance, Department of Economic Affairs [Banking Division] has considered and decided to accept the Model Scheme prepared by IBA for implementation, subject to the following modifications :
The condition of minimum qualifying marks in the last examination may be dropped.
No margin may be insisted upon for loans upto Rs.4 lakh. However, for loans of higher amounts, the margin requirement may be 5% for inland studies and 15% for studies abroad.
No security may be insisted upon for loans upto Rs.4 lakh. However, for loans above this amount, collateral security of suitable value or co-obligation of parents/guardians/third party alongwith the assignment of future income of the student for payment of instalments may be obtained.
Loans upto Rs.4 lakh may be advanced at interest rate not exceeding PLR of the bank. Above Rs.4 lakh, the interest rate may be PLR + 1%.
3. We accordingly, forward herewith a copy of the model scheme prepared by IBA for implementation by banks after effecting the modifications indicated at [i] to [iv] of para 2 above, at the earliest so that its benefits are available to students from this academic session itself.
4. It is clarified that this Scheme is separate and in addition to and not in supersession of the scheme earlier circulated by RBI under Supreme Court orders vide our circular RPCD.SP.BC.10/09.07.01/99-2000 dated 31st July 1999 issued to public sector banks.
5. Please acknowledge receipt.
The Finance Minister in a meeting with the Chief Executives of the public sector banks on 13 June 2000 had highlighted the role of commercial banks in facilitating pursuit of higher education by poor, but meritorious students. In pursuance thereof the Indian Banks’ Association constituted a Study Group under the chairmanship of Shri R.J.Kamath, Chairman and Managing Director of Canara Bank to examine the issue in detail. Based on the recommendations of the Study Group, a comprehensive model educational loan scheme was prepared by the Indian Banks’ Association for adoption by all banks. The Scheme aims at providing financial support from the banking system to deserving/meritorious students for pursuing higher education in India and abroad.The scheme was announced in the Union Budget for 2001-2002 and discussed in the meeting the Finance Minister had with the Chief Executives of banks on 7 April 2001.
2. Government of India, Ministry of Finance, Department of Economic Affairs [Banking Division] has considered and decided to accept the Model Scheme prepared by IBA for implementation, subject to the following modifications :
The condition of minimum qualifying marks in the last examination may be dropped.
No margin may be insisted upon for loans upto Rs.4 lakh. However, for loans of higher amounts, the margin requirement may be 5% for inland studies and 15% for studies abroad.
No security may be insisted upon for loans upto Rs.4 lakh. However, for loans above this amount, collateral security of suitable value or co-obligation of parents/guardians/third party alongwith the assignment of future income of the student for payment of instalments may be obtained.
Loans upto Rs.4 lakh may be advanced at interest rate not exceeding PLR of the bank. Above Rs.4 lakh, the interest rate may be PLR + 1%.
3. We accordingly, forward herewith a copy of the model scheme prepared by IBA for implementation by banks after effecting the modifications indicated at [i] to [iv] of para 2 above, at the earliest so that its benefits are available to students from this academic session itself.
4. It is clarified that this Scheme is separate and in addition to and not in supersession of the scheme earlier circulated by RBI under Supreme Court orders vide our circular RPCD.SP.BC.10/09.07.01/99-2000 dated 31st July 1999 issued to public sector banks.
5. Please acknowledge receipt.
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