In a move that will impact future management and engineering hopefuls, students who opt for these subjects under the management quota in India and abroad will no longer be given education loans.
The apex body of banks, the Indian Banks Association (IBA), has debarred the management quota from the education loan scheme in a bid to bring down increasing bad assets from education loans.
“The admission under management quota should be kept outside the scope of the scheme,” said an IBA’s circular, after the banks reported non repayment of worth Rs 1,000 crore.
The revised education loan scheme to be effective from the next financial year was approved after incorporating finance ministry suggestions.
Under the education loan scheme, it is possible to borrow up to Rs 10 lakh for domestic education and Rs 20 lakh for studying abroad. Borrowers need not pay during the tenure of the course plus a year after. The repayment period is five to seven years.
The move would impact about 15% admissions in professional colleges
Entire tuition fees may no be covered as education loan linked to employability of the course
The decision taken to reduce bad assets from education loans
Although merit will be the sole criteria for seek loan for admission in non-management quota seats, the IBA for the first time has asked banks to sanction the money based on the employability potential.
It will mean that the banks will conduct an assessment of the potential salary a student will get after completing the course before sanctioning the loan.
“There will be a possibility that entire fees may not be covered from the education loan,” said a functionary of a Noida based professional institute, who was willing to be quoted.
The circular came into light after member of parliament KN Balagopal wrote to finance minister Pranab Mukerjee demanding is withdrawal terming it a “grave injustice” to the student community.
“Many students may face problem in getting loan,” said G Chaturvedi, alternate president of Education Promotion Society of India, an apex body of self financing higher education institutions.
The IBA has constituted a committee under the chairmanship of TM Bhasin, chairman and managing director of Indian Bank to review and redraft the scheme. The new education loan scheme was notified after approval from the finance ministry.