Executive Summary:
This document outlines guidelines for education loan disbursement, as addressed in Lok Sabha Unstarred Question No. 1157 on July 28, 2025. It details the Model Education Loan Scheme, emphasizing collateral requirements, loan rejection processes, and initiatives like the PM Vidyalaxmi scheme. The guidelines aim to facilitate access to education loans for students, particularly those from economically weaker sections.
Key Points / Main Content:
Model Education Loan Scheme:
* Scheduled Commercial Banks (SCBs) are advised to adopt the Model Education Loan Scheme formulated by the Indian Banks Association (IBA).
* The scheme provides need-based education loans.
* No collateral or third-party guarantee is required for loans up to ₹7.50 lakhs if eligible for Central Sector Interest Subsidy Scheme (CSIS) and Credit Guarantee Fund Scheme for Education Loan (CGFSEL).
* No margin is required for loans up to ₹4 lakhs.
* A moratorium period of study period plus one year is allowed.
* The repayment period after the moratorium is up to 15 years.
* Public Sector Banks (PSBs) may provide collateral-free loans beyond ₹7.50 lakhs based on their board-approved policies.
Loan Rejection:
* Data on the number of education loans rejected by PSBs is not centrally maintained.
* Loan application rejections must have the concurrence of the next higher authority.
* Students must be informed of the rejection reason.
* Compound Annual Growth Rate of amount disbursed is 20% from FY 2020-21 to 2024-25.
PM Vidyalaxmi Scheme:
* Launched on November 6, 2024, to facilitate loans to meritorious students.
* Enables collateral-free, guarantor-free education loans for students admitted to the top 860 Quality Higher Educational Institutions (QHEIs).
* Covers full tuition fees and specified course-related expenses for study in India.
* Provides a 3% interest subvention on loans up to ₹10 lakhs to a maximum of one lakh needy students per year with family income less than ₹8 lakhs.
* Loan amounts up to ₹7.5 lakhs receive a 75% credit guarantee from the Government of India through NCGTC.
Impact Analysis:
Students:
* Impact: Easier access to education loans, especially for those from economically weaker sections and those attending top educational institutions. Reduced need for collateral and guarantors.
* Action Required: Apply for loans under the Model Education Loan Scheme or PM Vidyalaxmi scheme, if eligible.
Scheduled Commercial Banks (SCBs) and Public Sector Banks (PSBs):
* Impact: Need to adhere to the guidelines of the Model Education Loan Scheme and PM Vidyalaxmi scheme.
* Action Required: Implement the Model Education Loan Scheme, process loan applications according to the guidelines, and follow transparent rejection procedures.
Indian Banks Association (IBA):
* Impact: Continued role in formulating and promoting the Model Education Loan Scheme.
* Action Required: Ensure the Model Education Loan Scheme remains relevant and effective.
Government of India:
* Impact: Increased access to education for meritorious students, particularly those from families with lower annual incomes; potential reduction in financial barriers to higher education.
* Action Required: Monitor and support the implementation of the PM Vidyalaxmi scheme and the Model Education Loan Scheme, provide credit guarantees, and ensure interest subventions are effectively disbursed.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for advising Scheduled Commercial Banks on education loan schemes.
Indian Banks Association: Organization that formulated the Model Education Loan Scheme adopted by Scheduled Commercial Banks.
Model Education Loan Scheme: A scheme formulated by the Indian Banks Association and adopted by Scheduled Commercial Banks for providing need-based education loans.
Central Sector Interest Subsidy Scheme: A scheme providing interest subsidy on education loans, abbreviated as CSIS.
Credit Guarantee Fund Scheme for Education loan: A scheme providing credit guarantee for education loans, abbreviated as CGFSEL.
PM Vidyalaxmi scheme: A scheme launched on 06.11.2024 to facilitate education loans to meritorious students through banks.
NCGTC: An entity through which the Government of India provides a 75% credit guarantee on loan amounts up to 7.5 lakhs.
Scheduled Commercial Banks: Banks advised by the Reserve Bank of India to adopt the Model Education Loan Scheme.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 1157
ANSWERED ON MONDAY, 28th JULY, 2025/ 6 SRAVANA 1947 (SAKA)
GUIDELINES FOR DISBURSEMENT OF EDUCATION LOANS
1157 SMT. RACHNA BANERJEE
Will the Minister of FINANCE be pleased to state:
(a) the details of the guidelines for disbursement of education loans;
(b) whether the Government has made it compulsory to produce/produce collateral security for
education loans;
(c) the number of education loans rejected by public sector banks during the last five years;
and
(d) the steps taken by the Government to facilitate students to get education loans?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SH. PANKAJ CHAUDHARY)
(a) to (b) All Scheduled Commercial Banks (SCBs) have been advised by Reserve Bank of
India to adopt Model Education Loan Scheme, formulated by Indian Banks’ Association (IBA).
The main features of the scheme are as under:
The scheme provides need-based education loan.
No collateral security or third-party guarantee is required for loans amount up to ₹
7.50 lakhs, provided they are eligible for Central Sector Interest Subsidy Scheme
(CSIS)/ Credit Guarantee Fund Scheme for Education loan (CGFSEL)
No Margin for loans up to ₹ 4 lakhs.
Moratorium period is allowed upto study period plus one year in all cases.
Repayment period (after moratorium) is available upto 15 years for all loans.
Public Sector Banks (PSBs) also provide collateral free loans beyond ₹ 7.50 lakhs, on case to
case basis as per their Board approved policies.
(c) As informed by IBA, the data on number of education loans rejected by PSBs is not
maintained centrally. However, as per the IBA Model Education Loan Scheme, rejection of
loan application, if any, shall be done with the concurrence of the next higher authority and
conveyed to the student stating reason for rejection.Further, as per the information furnished by PSBs, it is observed that in terms of amount
disbursed, the Compound Annual Growth Rate over a period of five years i.e. from FY 2020-
21 to 2024-25 is 20%.
(d) PM Vidyalaxmi scheme has been launched on 06.11.2024, which enables loans through
banks to meritorious students so that financial constraints do not prevent any youth of India
from pursuing quality higher education. The scheme facilitates and enables education loans to
meritorious students who get admission in the top 860 Quality Higher Educational Institutions
(QHEIs) in the country and enables meritorious students of these QHEIs to take collateral free,
guarantor free education loans through a simple, transparent, student-friendly and entirely
digital application process. The loan shall cover full amount of tuition fees and other specified
expenses related to the course, for study in India only.
The scheme also provides for 3% interest subvention on loans up to ₹ 10 lakh to a maximum
of one lakh needy students in a year, where annual family income is less than ₹ 8 lakhs. This
is in addition to the full interest subvention already offered to students with up to ₹ 4.5 lakhs
annual family income under CSIS.
Further, loan amounts up to ₹ 7.5 lakhs will also be provided a 75% credit guarantee by the
Government of India, through NCGTC.
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