Merit students taking management quota seats too can get bank loans

Merit students taking admission in recognised private institutions under management quota will also be eligible for bank education loans.

This clause has been incorporated by the Indian Banks’ Association in its revised model education loan scheme. The reason is that there have been cases of meritorious students, despite getting admission in a government college, preferring to join a private institution. This can be for several reasons including proximity to home and notgetting the course of choice in the government college.

Another new clause pertains to the fees benchmark. Henceforth, for courses under the management quota, banks will take into account the fees as approved by the State government or an approved regulatory body for payment seats, subject to viability of repayment.

The third clause expands the scope of the courses eligible for bank finance. Students intending to pursue degree/diploma in nursing approved by the Indian Nursing Council or any other discipline approved by any other regulatory body, as the case may be, will be eligible for financing from banks.

Meanwhile, Finance Ministry has asked banks to enter into Memorandum of Understanding (MoU) with educational institutions to provide loans to students. Further, it wants an annual review of the asset quality of educational loans given under the MoU. As per Reserve Bank of India data, as on August 24, 2012, banks’ education loans portfolio stood at Rs 52,700 crore (Rs 47,600 crore as on August 26, 2011).

The IBA first put together the model educational loan scheme in 2001 to help meritorious students pursue higher education in technical and professional courses. The same was advised to banks for implementation by the RBI.

As the focus of the scheme is on development of human capital, repayment of the loan is expected to come from future earnings of the student after completion of education.

Hence, the assessment of the loan by banks is be based on employability and earning potential of the student upon completion of the course and not the parental income/family wealth.

Based on experience gained in the operation of the scheme, the plan was revised twice earlier — 2004-05 and 2007-08.

ramkumar.k@thehindu.co.in