Education loans should be linked to base rates: Fin Ministry

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By Sunil Fernandes

Updated: Saturday, December 8, 2012, 11:05 [IST]

The Finance Ministry has said that banks should price their loan products including education loans linked with the base rates approved by their respective Boards and as per as per directions of Reserve Bank of India.

"Banks are not permitted to resort to any lending below the Base Rates. Accordingly, interest rates on education loans are decided by the bank concerned as per their approved policy, " the Finance Ministry has said.

In order to provide relief to the students, the Model Education Loan Scheme of Indian Banks' Association (IBA) provides for certain concessions on educational loans which inter-alia includes:

• Simple interest is charged during the study period and upto commencement of repayment;

• 1% interest concession provided by the banks, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment;

• 0.5% concession in interest rates is provided for the girl students;

• Full interest subsidy has been made available for educational loans disbursed on or after 1st April, 2009 during the period of moratorium for the students belonging to economically weaker sections from scheduled banks under ‘Interest Subsidy' scheme of Ministry of Human Resource Development

This was stated by the Minister of State for Finance, Shri Namo Narian Meena in a written reply to a question in the Lok Sabha today.

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