Banks complying with education loan scheme: FinMin

New Delhi, Aug 31 (UNI) Banks are complying with the security/ guarantee norms of the Model Education Loan Scheme, 2004, Minister of State for Finance Pawan Kumar Bansal informed the Lok Sabha today.

Under the norms, there is no security for loans upto Rs 4 lakh.

For loans above Rs 4 lakh and upto Rs 7.5 lakh, collateral is necessary in the form of a suitable third party guarantee, Mr Bansal said in a written reply.

Banks may, at their discretion, waive third party guarantee, if satisfied with the networth/means of parent executing the document as joint borrower.

For loans above Rs 7.5 lakh, collateral security of suitable value or suitable third party guarantee is necessary along with the assignment of future income of the student for payment of installments.

Under the scheme, banks are to charge interest on education loan upto Rs 4 lakh at benchmark prime lending rate (BPLR) and above Rs 4 lakh at BPLR plus one per cent. BPLR is fixed by the banks themselves with the approval of their Boards and not by the RBI or the government.

The scheme does not provide for loans at rates other than those indicated above for reserve category students.

UNI