IBA Model Loan Scheme for Vocational Education and Training

Banks have introduced IBA Model Loan Scheme for Vocational Education and Training from 1st July 2012.  The circular issued by IBA and the scheme is given b elow.

sourece: http://www.iba.org.in/educational_loan.asp

Chief Executive

No. CE/209

31^st May, 2012

To :

Chief Executives of all Member Banks

Dear Sirs,

IBA MODEL LOAN SCHEME FOR VOCATIONAL EDUCATION AND TRAINING

Please refer to our circular No. SB/CIR/10-21-VC/4715 dated 20^th December, 2011              enclosing a ‘Model Educational Loan Scheme for Vocational Courses.  On subsequent interactions with the Dept. of Financial Services and the Prime Minister’s National Council on Skill Development under the Chairmanship of Mr. S Ramadorai brought out the need for bank loans for Skill Development training involving periods even lesser than 6 months.  It was informed that  National Council on Skill Development has ambitious plans to develop skilled work force in the country and around 25 lakh persons are expected to avail credit for vocational / skill development programmes in the next 3 years.  The Prime Minister’s office also sent us some suggestions for modifying the Model Scheme to make the bank scheme in line with the Govt. plan for Skill Development.  IBA also interacted with some of the Skill Development Institutes in Maharashtra for feedback and suggestions. 

The IBA Sub-Committee on Educational Loan Scheme considered the suggestions and the revised Model Scheme was placed before the IBA Managing Committee at its meeting held on 25^th May, 2012.  The Managing Committee after discussions approved the changes in the Scheme including change in the title of the Scheme. The Model Educational Loan Scheme for Vocational Courses will now be called as ‘IBA Model Loan Scheme for Vocational Education and Training’.

A copy of the revised Model Scheme is enclosed for your perusal.  Member Banks may like to adopt and implement the Scheme with effect from 1^st July, 2012, after taking the approval of the Bank’s Board.

While on the subject, Member Banks may kindly note that the Govt. is proposing to establish a Credit Guarantee Fund Trust to administer and operate Credit Guarantee Fund for loans granted by banks for Vocational Courses including Skill Development.  The details are being worked out.

Yours faithfully,

(K Ramakrishnan)

Encl. : Copy of revised Model Scheme.

sb/vocational courses/cir ces model loan sch for vocL courses.

c.c. to : 1) All SLBC Convenors

             2) All Members of the IBA Sub-Committee on Educational Loan Scheme

                                  

                              Indian Banks’ Association

IBA MODEL LOAN SCHEME FOR VOCATIONAL

EDUCATION AND TRAINING

 1.      INTRODUCTION

The IBA Model Educational Loan Scheme for pursuing higher studies in India & Abroad was formulated initially in the year 2001 and modified subsequently from time to time with the objective of facilitating pursuit of higher studies by meritorious students.  The focus was mainly on technical and professional courses in recognised Colleges and Universities.  The vocational courses offered by ITIs, ITCs, Polytechnics and other technical institutions / bodies were not covered in the Model Educational Loan Scheme (some banks do provide loans for pursuing 3 year diploma courses offered by Polytechnic Institutes).  However, in view of the initiatives being taken by the Govt. of India in skill development in recent years, a need was felt for providing institutional funding for the students undergoing specialized skill development programs in recognized institutions.  The Govt. has estimated that the country would require 10 to 15 million skilled workers every year to support the development process.  The initiatives being taken by the Govt. are for setting up  new training facilities, modernization of existing centres and intensive faculty development.  The “Model Loan Scheme for Vocational Education and Training” has been developed as an extension of the existing Model Educational Loan Scheme for pursuing higher education in India & Abroad, to support the national initiatives for skill development. 

2.   OBJECTIVE

The Model Loan Scheme for Vocational Education and Training aims at providing financial support from the banking system to those who, have the minimum educational qualification, as required by the institution / organization running the course eligible under the scheme.

3.  APPLICABILITY OF THE SCHEME

      The scheme could be adopted by all member banks of the Association or other banks and financial institutions as may be advised by the RBI.  The scheme provides broad guidelines to the banks for operationalising the  loan scheme and the implementing bank will have the discretion to make changes as deemed fit.

4.      ELIGIBILITY CRITERIA

4.1  Student Eligibility

-          The student should be an Indian National

-          Have secured admission in a course run or supported by a Ministry / Dept./ Organisation of the Govt. or a company / society / organization supported by National Skill Development Corporation or State Skill Missions / State  Skill Corporations, preferably leading to a certificate / diploma / degree, etc. issued by a Govt. organization or an organization recognized / authorized by the Govt. to do so.

4.2  Courses Eligible

Vocational / Skill development courses of duration from 2 months to 3 years run or supported by a Ministry / Dept. / Organisation of the Govt. or a company / society / organization supported by National Skill Development Corporation or State Skill Missions / State Skill Corporations, preferably leading to a certificate / diploma / degree, etc. issued by a Govt. organization or an organization recognized / authorized by the Govt. to do so. .  State Level Bankers Committee (SLBC) / State Level Coordination Committee (SLCC) may add other skill development courses / programmes, having good employability.

4.3  Minimum Age

There is no specific restriction with regard to the age of the student to be eligible for the loan.  However, if the student was a minor, while the parent executes documents for the loan, the bank will obtain a letter of ratification from him / her upon attaining majority.

5.      QUANTUM OF FINANCE

Need based finance to meet expenses as worked out under para 6 below will be considered subject to the following ceilings :

-                      For courses of duration upto 3 months                       ₹ 20,000/-

-                      For courses of duration 3 to 6 months                        ₹ 50,000/                               

            -           for courses of duration 6 months to 1 year                 ₹ 75,000/-

            -           for courses of duration above 1 year                          ₹ 1,50,000/-

Banks may consider sanction of higher limits for courses of duration above one year, if required, for specific courses offered by reputed institutions having regard to the nature of such courses and employability (ability to repay out of job earnings).

6.      EXPENSES CONSIDERED FOR LOAN

1.                  Tuition / course fee .

2.                  Examination / Library / Laboratory fee

3.                  Caution deposit

4.                  Purchase of books, equipments and instruments

5.                  Any other reasonable expenditure found necessary for completion of the course. (As such courses are localized boarding, lodging may not be necessary.  However, wherever it has been found necessary, the same could be considered on merits)

7.   MARGIN

            Nil

   8.   RATE OF INTEREST

Interest rate to be charged linked to the base rate of banks as decided by the individual banks or at reduced rate, if an interest subsidy is provided by the Central / State Govt. to all or a class of beneficiaries proposed to be targeted. Simple Interest will be charged during the study period and upto commencement of repayment.

Note : 

·         Servicing of interest during study period and the moratorium period till commencement of repayment is optional for students.

·         1% interest concession may be provided by the bank, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment. 

9.       PROCESSING CHARGES

Nil

10.   SECURITY

No collateral or third party guarantee will be taken.  However, the parent will execute loan document along with the student borrower as joint borrower.

11.   MORATORIUM PERIOD

Upon completion of the course, repayment will start after a moratorium period as indicated below :

- for courses of duration upto 1 year  -           6 months from the completion of the

                                                                        course.

- for courses of duration above 1 year-           12 months from the completion of

                                                                        the course.

12.   REPAYMENT

The loan will be repaid after the moratorium period as indicated in para 11 in Equated Monthly Instalments (EMIs) as follows :

-           courses upto 1 year        -        In  2 to 5 years

-           courses above 1 year      -        In  3 to 7 years.

13.   INSURANCE

Optional at the requirement of the borrower.

     14.  PREPAYMENT

The borrower can repay the loan any time after commencement of repayment before having to pay any prepayment charges.

15.  OTHER TERMS & CONDITIONS

Other terms and conditions as applicable to the “IBA Model Educational Loan Scheme for pursuing higher education in India and Abroad” will be applicable to this scheme also.