After introducing 27 per cent quota for other backward classes in higher education institutes, the government plans to open yet another door in its education-for-all mission.
Banks may grant education loans to students from economically weaker sections planning to enroll in higher education institutions at four per cent interest rate from the next financial year. The government is considering a proposal to share the burden of lower interest rates with banks — both private and the public sector. At present, the interest rate on education loan is nearly 11 per cent.
The seven per cent concession will be shared equally between the government and banks, a senior government official said. “This is part of the private sector’s commitment to affirmative action for the weaker section,” said an official of the Confederation of Indian Industries.
The industry and government reached an agreement at a meeting convened by T.K.A. Nair, principal secretary to the Prime Minister, on January 12. Representatives of CII, Assocham, Indian Bank Association, FICCI, Education Secretary R.P. Aggarwal and Finance Secretary Vinod Rai took part in the meeting.
The Finance Ministry has floated a proposal in this regard. “If all goes well, an announcement may be made by the Finance Minister in the budget,” a senior government official said.
Before that, the government was working on various aspects of the scheme like increasing resources to pay subsidised interest rate to banks and the mean test for the economically weaker sections. Mean test is the upper annual income limit to make a student eligible for the scheme.
The government is considering increasing cess on education to fund the initiative.
If the proposal works out, the government will accept a key recommendation of the National Knowledge Commission. The commission had sought education loans at a lower interest rate for the educationally weaker sections.