Public Sector Banks to offer Insurance linked Education Loans

Public sector banks will soon start offering insurance-linked education loans. The insurance premium will be a part of the expenses for the loan. The Indian Banks’ Association (IBA) has put together a model education loan scheme that entails a higher quantum of loan. Even as the scheme becomes more expensive, lending standards will become tighter for loans for overseas education, reports the Economics Times

The loan limit has been increased from Rs 7.5 lakh toRs 10 lakh for studies in India and from Rs 15 lakh to Rs 20 lakh for studies overseas. Further, there will now be a provision of top-up loan for students for further studies. A cap of sorts has been fixed for the cost of such loans — the rate of interest should not exceed the benchmark prime lending rate (BPLR) for loans up to Rs 4 lakh. For loans over this limit, the rate of interest, should not be more than 100 basis points over the BPLR.

Some banks including the State Bank of Hyderabad and the Union Bank of India are offering special rates of interests for girl students availing educational loans.

Under the scheme, life policies and mutual fund units will now be treated as permissible security for the loan. Banks can now lend multiple loans to a single family. Education loans will now be offered for aeronautical engineering, pilot training, shipping training as part of eligible courses.

The norms will however be stiffer for loans for overseas education. For loans between Rs 4 lakh to Rs 7.5 lakh, banks will impose more restrictive security by including co-obligation of parents. This is as a result of rising NPAs in this segment, when parents claimed that they were not responsible for the loan repayments of their wards, a banker said.

Also, banks will now charge upfront, the processing fees for education loans for studies abroad. Banks will also issue a unique identification number or a identity card for loans for studies overseas.