RESERVE BANK OF INDIA
Rural Planning & Credit Department
CENTRAL OFFICE
Central Office Building ,
13 th Floor, Mumbai - 400 001

RPCD.PLNFS.BC.NO.83/06.12.05/2000-01

April 28, 2001

To
The Chairman/Managing Director
All Scheduled Commercial Banks

Dear Sir,

The Finance Minister in a meeting with the Chief Executives of the public sector banks on 13 June, 2000 had highlighted the role of commercial banks in facilitating pursuit of higher education by poor, but meritorious students. In pursuance thereof the Indian Banks' Association constituted a Study Group under the chairmanship of Shri R.J.Kamath, Chairman and Managing Director of Central Bank to examine the issue in detail. Based on the recommendations of the Study Group, a comprehensive model educational loan scheme was prepared by the Indian Banks' Association for adoption by all banks. The Scheme aims at providing financial support from the banking system to deserving/meritorious students for pursuing higher education in India and abroad. The scheme was announced in the Union Budget for 2001-2002 and discussed in the meeting the Finance Minister had with the Chief Executives of banks on 7 April 2001.

2. Government of India , Ministry of Finance, Department of Economic Affairs (Banking Division) has considered and decided to accept the Model Scheme prepared by IBA for implementation, subject to the following modifications: 

       I.  The condition of minimum qualifying marks in the last examination may be dropped.

       II. No margin may be insisted upon for loans up to Rs.4 lakhs. However, for loans of             higher amounts, the margin requirement may be 5% for inland studies and 15% for             studies abroad.

      III. No security may be insisted upon for loans up to Rs.4 lakh. However, for loans above             this amount, collateral security of suitable value or co-obligation of             parents/guardians/third party along with the assignment of future income of the             student for payment of installments may be obtained.

      IV. Loans up to Rs.4 lakh may be advanced at interest rate not exceeding PLR of the             bank. Above Rs.4 lakh, the interest rate may be PLR+1%.

3. We accordingly, forward herewith a copy of the model scheme prepared by IBA for implementation by banks after effecting the modifications indicated at (i) to (iv) of para 2 above, at the earliest so that its benefits are available to students from this academic session itself. 

4.  It is clarified that this Scheme is separate and in addition to and not in supersession of the scheme earlier circulated by RBI under Supreme Court orders vide our circular RPCD.bc.10/09.07.01/99-2000 dated 31 st July 1999 issued to public sector banks. 

5. Please acknowledge receipt. 

Yours faithfully

Sd/-

(Varughese John)
General Manager

Encl: As above