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Education loan scheme simplified

By Our Special Correspondent

NEW DELHI, AUG. 10 . Giving effect to the Finance Minister, P. Chidambaram's Budget announcement, the Indian Banks Association has issued a circular on July 23 to all member banks not to ask for collateral on education loans up to Rs. 7.5 lakhs. Accordingly, now no security is required for loans up to Rs. 4 lakhs and a satisfactory third party guarantee would be adequate for loans above Rs. 4 lakhs and up to Rs. 7.5 lakhs. Collateral security of suitable value is required for loans above Rs. 7.5 lakhs.

The Comprehensive Education Loan Scheme was started on April 2001 and under this scheme loans up to Rs. 7.5 lakhs were available for studies within the country and up to Rs.15 lakhs for studies abroad. No collateral or margin amount is required for loans up to Rs. 4 lakhs.

For loans of higher amounts, the margin requirement is five per cent for inland studies and 15 per cent for studies abroad. The rate of interest on loans up to Rs. 4 lakhs is the Prime Lending Rate (PLR) and for loans above Rs. 4 lakhs PLR + one per cent.

According to the Union Finance Ministry, the Education Loan Scheme has been very successful since its launch in 2001. Against roughly 50,000 accounts and Rs. 670 crore loans as on March 31, 2001, the number of accounts has gone up to approximately 1,53,000 and loan amount to Rs. 2,600 crores on March 31, 2004.

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