Guarantee limit likely to be increased to Rs 10 Lakh


Soon no collateral will be required for student loans up to 10 lakhs: report

The central government may increase the collateral limit for education loans by 33% to Rs 10 lakh from the current Rs 7.5 lakh.

Student loans are guaranteed under the central government’s Credit Guarantee Fund for Student Loans (CGFSEL).

Depending on the scheme, a student can avail an education loan without any collateral or third party guarantee up to a maximum loan amount of Rs 7.5 lakh.

The Financial Services Department of the Ministry of Finance would consult with the Ministry of Education to increase the maximum guarantee limit to Rs 10 lakh, according to a Indian Express report.

The revised guarantee limit could be increased to around Rs 10 lakh or even more; the report cites an official source.

The Financial Services Department held a meeting with the 12 public banks in August to discuss student loan disbursement targets. At the meeting, a bank official had asked the department to standardize the guarantee limit on student loans.

The official pointed out that while the CGFSEL scheme offers collateral for education loans up to Rs 7.5 lakh, some state governments have set Rs 10 lakh as collateral limit, the report added.

The CGFSEL scheme benefits students belonging to the Economically Weak Section (EWS).

The annual gross family income of the student seeking a loan should not exceed Rs 4.50 lakh. The interest rate charged by the lender for student loans under the program can only be up to 2% per annum above the base rate.

In addition, students in the EWS category can also apply for full interest subsidy for these loans during the moratorium period, which is the total duration of the course plus one year.

The grant is awarded for the maximum loan amount of Rs 7.50 lakh.


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