A Detailed Guide on RBI Rules for Education Loan in 2019. Repayment and Recovery!
The RBI is responsible for deciding the lending criteria for banks in India. It has decided to include Educational loans as a priority sector in lending from banks. The Education loan is like any other loan for which the bank looks for the credit-worthiness of the borrower before lending the loan to them. A student might not have a credit history. Thus, banks look at the CIBIL score of the parents who is the co-signer for the student borrower.
RBI guidelines for Education loan:
The RBI insists that the banks grant the Education loan to meritorious students. The word meritorious is a relative term which is assumed if the student has qualified for the entrance exam to professional and technical courses.
It also considers students who have secured admission to good colleges in terms of their placement history thus reflecting the future employability of the students through their campus recruitment.
Section 80E of the Income-tax Act claims that the interest part of the loan can be claimed as a subsidy while filling for the Income Tax. Apart from this law, the CSIS scheme provides full interest subsidy during the moratorium period for economically weaker section.
Loans must be divided into secured and unsecured loans depending on the amount granted. For loan amount less than 4 lakhs, no collateral is required while for loan amount above 4 lakhs, a security deposit is required in the form of collateral.
Banks also offer a moratorium period just after the completion of the course during which the borrower might look for a job to start repayment soon after the completion of the period.
Interest rates decided by the RBI depends upon whether you are taking an Education loan for India or abroad. Students securing admission to high rated Educational institutes in India need to pay a comparatively lower interest rate. Interest rates mainly comprise of fixed and floating rates in general. While banks in India provide loans at a floating rate of interest for study in Indian colleges, foreign loans are offered at fixed interest rates.
RBI rules for Educational loan repayment include paying back the loan in the form of EMI as soon as the moratorium period gets over. According to experts, EMI of a person should not exceed fifty percent of one’s salary. The repayment should be completed within a maximum tenure of 8-15 years soon after the grace period. In rare cases when a student obtains another loan for a course taken up soon after the original course completion, the repayment period can be extended depending on the time until the next course is completed.
Though the RBI rules for education loan has been made much reliable in terms of interest and repayment factors making Education loan affordable for all, parents should also look out at a variety of factors such as the possible hike in interest rates, EMI rates and repayment options available before taking up a loan.
