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budget Chidambaram education loan subsidy interest waived off
budget Chidambaram education loan subsidy interest waived off

Indian FM’s poll gift: interest on student loans waived off

37
By on Education loans, News

As part of the Interim Budget, India’s Finance Minister P Chidambaram announced that the Govt. will take over the liability of outstanding interest as of Dec ’13, but borrowers will have to pay interest after Jan 1, ’14

In a move that will help reduce a large number of education loans given by public sector banks that have turned bad, finance minister P Chidambaram has announced a moratorium period for all education loans taken up to March 31, 2009, and outstanding on December 2013.
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“The government will take over the liability of outstanding interest as of December 2013, but the borrower will have to pay interest for the period after January 1, 2014,” said Chidambaram.
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The finance minister said that nearly 9 lakh student borrowers will benefit to the tune of approximately Rs 2,600 crore. The funds will be provided in the current financial year itself by transferring the amount to Canara Bank, the designated banker for central scheme for interest subsidy (CSIS). “Details of the scheme will be announced shortly,” Chidambaram said.
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At the end of December 2013, public sector banks had 25.70 lakh student loan accounts and the amount outstanding was Rs 57,700 crore. According to a senior banker, the move will help reduce the non-performing assets (NPA) on the books of the banks before 2009.
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The government provides interest subsidy for professional and technical courses for loans not exceeding Rs 10 lakh. Interest subsidy is not extended to loans taken for studying abroad.
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Around 69 per cent of the total education loans outstanding are loans up to Rs 4 lakh. Since banks do not take any collateral/security for loan amount up to Rs 4 lakh, this category has the highest non-performing assets.
As on March 2012, the NPAs was 5.76 per cent on loan amount up to Rs 4 lakh and 2.26 per cent for loans more than Rs 4 lakh. The total NPA in education loans was 4.69 per cent.
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As on March 31, 2009, the number of outstanding accounts was 15.8 lakh and the total education loans outstanding was Rs 26,912.73 crore. The NPA was 2.22 per cent for loan size up to Rs 4 lakh and 1.18 per cent for loan amount higher than Rs 4 lakh. The total NPA for education loans outstanding as on March 31, 2009 was 1.87 per cent.

The CSIS for education loans was introduced by Pranab Mukherjee, who was the finance minister during 2009-10 in respect of education loans disbursed after April 1, 2009, under which the government took over the burden of interest for the duration of the period of study and a little beyond.

Repayment tenure for education loans varies from bank to bank, but is generally seven to 10 years, excluding moratorium period. The moratorium period refers to repayment holiday during the course tenure.

Oneyearmba.co.in view – While the interest subsidy comes as a relief to lakhs of students, one can’t help but sympathize with the many, who despite the bad economic environment, have paid their dues diligently by cutting corners in their domestic and personal expenses. Shouldn’t these people benefit too from this step? Otherwise, the Finance Minister’s move seems to encourage defaulting on education loans and sends out a wrong message to people trying their best to stay on the right side of the law.

37 Comments

  1. vikas singh on

    I have education loan of Rs.3 lakh from Dena bank. After the announcement of the scheme in the budget, i contacted my bank and to my surprise they denied saying that the entire announcement is just a ” Vote bank politics” and is “Lollypop” that has nothing to do with the reality. He asked me to pay the amount with the interest. I am in a fix. My repayment period starts in next 15 days and I m still not clear if I have to pay the Interest or not? How can I get the further clarification on this? Please help.

    Reply
    • admin on

      Hi Vikas,

      The Government is yet to announce the details of the policy so it’s not clear how the provision is going to be implemented. It might be helpful to write to your bank with you concerns and take their advice on mail on how to approach your loan repayment.

      Reply
  2. s mohan raj on

    i have availed a edu loan in indian bank,i want to repay that.When the announcement will be implement.what will be the minimum and maximum days.pls suggest.

    Reply
    • Sai ram on

      Even though it is a boon for the students who have availed the loan, in other words it is encouraging the students who were irregular in the payment. students who struggled hard to make the payment also mus tbe benefitted. As you said”While the interest subsidy comes as a relief to lakhs of students, one can’t help but sympathize with the many, who despite the bad economic environment, have paid their dues diligently by cutting corners in their domestic and personal expenses. Shouldn’t these people benefit too from this step? Otherwise, the Finance Minister’s move seems to encourage defaulting on education loans and sends out a wrong message to people trying their best to stay on the right side of the law. ”

      Finance minister must amend it or clarify that the interest scheduled for the moratorium period must be waived irrespective of whether the amount is paid or outstanding and adjusted in the principal as he has clearly mentioned it as ” moratorium period and outstanding as on 31st Dec 2013. “. This is beneficial for the entire student community who have availed the loans

      Reply
  4. nadiya on

    I have an education loan of 1.8 lakhs INR taken from SBT in 2007. The interest for the study period has come to 1.4 lakhs INR. My repayment date starts in a few days. Does the latest announcements mean that the interest for the period till dec 2013 is waived off?

    Reply
    • admin on

      Hi Nadiya, the announcement has been made, but banks are confused as it seems a concrete plan on how the scheme is to be implemented has not been released by the government. We would advise you not to assume anything as a misstep here it could have a impact on your CIBIL score (creditworthiness). It its best to write to your bank and get their guidance on this.

      Reply
      • vivek sahu on

        hello sir,
        I took loan in 2008 from dena bank. after this scheme also we have to pay the instalment or not because i am not able to pay this but bank manager is forcing me and my family to pay.
        Sir please let me know when this scheme will be impliment.

        Reply
        • admin on

          Hi Vivek, unfortunately no one knows. We advise you to play safe, and either continue with old terms or get the new terms in writing from your bank before changing your payment strategy.

          Reply
  5. H on

    Dear all, I had availed Rs. 85,000 as education loan from SBI bank, Mandya, Karnataka, during the year 2005. I have been paying interest and paid a total interest of Rs. 40,000 +, till date. But this repayment is not on regular basis. Whenever I get money I have paid. But recently, bank people called me and forced me to clear all the outstanding. But, I said, I can’t repay the full amount which is 1.25 Lakh. So, paid only 10,000 last month after they call me. But, recently, bank has approached the court and complained that, I have not met them since I have taken loan and I have not paid any amount. (Even though I have paid RS 40,000 till date) and the court has issued me summons to report to the court. I dont know, what to do? I am lecturer in position and feeling very shy to attend the court. Please somebody help me and guide me to resolve this issue.

    Reply
    • admin on

      Hi H,

      Sorry to hear about your situation. While your query extends beyond the purview of the discussion at hand, we would recommend that you first share the scans of your loan account statement reflecting the EMI payments made by you with the bank. If the bank does not withdraw the case in light of the proof provided by you, it seems you have no option but to engage a lawyer and approach the court with the proof of payments. That said, we would recommend that you consult a lawyer to understand the legal options available to you.

      Regards.

      Reply
  6. sasa on

    hi
    i have taken edu loan 2.5 Lks in 2007, central bank of india.Now the interest is 1.75lks. hardly i am paying 5000 – 8000 Rs every month since 08/2013. the have not given me any EMI details. its becoming burden to me bcs i am working in very small company.i want to know whether interest will waived off or not.if it will, how much time it will take.

    Reply
    • admin on

      Hi Sasa,

      The details of this scheme have not been announced by the government yet. In absence of details from the government, different banks are responding differently to the announcement. We would recommend that you get in touch with your bank with your query for the best way to resolve the situation.

      Reply
  8. Manushree on

    Hi,
    i have taken education loan 4 Lks in canara bank in 2009,now it become 6Lks, After 2 years i got job in one company.I was separated with my parents due to some personal issue and their annul income is Cross the 4.5Lks,whether am eligible to take interest waived off or not.Is their any way to take ,if it will, how much time it will take.Please somebody help me and guide me to resolve this issue.

    Reply
    • admin on

      Hi Manushree,

      We would recommend getting in touch with your bank on this issue. The last governments announcement has not been followed up with guidelines on how the loan waiver will work. Its best to have a written correspondence with your bank to get their perspective and to avoid a problem later.

      Regards.

      Reply
  9. kar on

    i have taken edu loan 1.3 Lks in 2007, Indian bank Now the interest is 1.85lks. hardly i am paying 7000 – 8000 Rs every month since 02/2014. the have not given me any against loan waived details. its becoming burden to me i am working in company very low pay .i want to know whether interest will waived off or not.if it will, how much time it will take& how approch the bank with valied information or GO passed aganst the waived off interest .

    Reply
  10. siva on

    hi,

    i have taken loan 96 thousand in 2007. they give me a amount 46000 IN second YEAR
    OF my study, another 46000 they given 3rd year AFTER my study completion. i have paid partially 40000 FOR up to 2013
    .i have received letter FROM bank regarding the waiver AND i have give the DOCUMENT LIKE PAN card parents income CERTIFICATE
    AND getting letter form lawyer.
    the government has takeover the interest OR NOT? IF they taken that 40000 paid amount will reduce FROM the
    original amount? please give me SOME information?

    Reply
  11. Ronit on

    Hiii,

    I have en educational loan of RS. 2.70lac from PNB Ujjain, which I have taken in 2007 for my full time MBA program for which , I have paid 2.40lac as on date. But after this announcement, I have not pay any EMIs which is with the suggestion of internal official of bank personal and I have left my Job to do something else on my own for better prospects, as to keep understanding that, there is no liabilities on my head now. And now after almost 8-9 month as there is no progress on the same announcement, I am worry that what will I do, as no job in my hand.

    Plz suggest something

    Reply
  12. sujeet on

    Hi…
    I have taken the education loan on PNB Bank of RS. 3 lac in 2011 to 2013 on the installments terms , but still i have no any installment payments till date. I came back to Bank the banker say’s your education loan has been 4.8 lac within One year , sir how is it possible but i wants to some amount to payment in education loan i.e one thing what is the process of forgive of interest amount and Chidambram say’s on the budget of 2013 education loan interest will be waived then what is the status and what to do ……any scheme to waived of interest amount ..

    Kindly do the needful….

    Reply
    • admin on

      Hi Sujeet,

      Hi sujeet, We would suggest talking to your bank on this one and preferably in writing. As the article above says, the announcement has not been followed up with any real concrete directive to the banks and everyone, including us, are unsure on what steps a student should take if caught in your circumstance.

      Either talk directly to the bank, or ask a representative such as a lawyer to intervene on your behalf and get clarity. Its always best to try and solve the issue at a personal level, before lawyering up.

      Reply
  13. harsh on

    hii sir,
    i have taken education loan on 2005 i have started to pay in 2010 still i have to pay 1.4 lakhs. relief in budget 2014 chidambaram declare to relief in intrest, so my question is total intrest from 2005 to 2013 will be OFF ( RELIEF) ??
    i visited to bank but they are not clearly known and not answering, please guide me…

    Reply
  14. Rajesh Srivastava on

    this benefit should be extended to all students including those studying abroad, the funny thing is the rate is very high i.e @14.5, initially it was @10.5,after moratorium being 2 year period it gone to@ 14.5, as parents have to wear the burden & those paying EMIs regularly with great difficulty, the benefit should be given to them as well.present FM will consider the request & accede to the request by looking into matter

    Reply
    • Rajesh Srivastava on

      No action has been taken by the present Finance minister Mr Arun Jaitely, on waiving the interest on borrowed by students after March ,2009 for studying abroad for one year MBA course(UK),for example I have taken loan Rs 20 lac from SBI Delhi for my son & I am regularly paying regular EMI @ interest rate 14.9%, being retd. central govt. servent, with difficulty paying EMI’s i,e Rs 43,808/-per month, I approached to Bank no direction has come from Govt. I request our FM to consider my genuine request to extend the benefit immediately to all students,
      regards,
      Rajesh Srivastava
      9868811484

      Reply
  15. RAMARAJAN on

    hello sir i was taking education loan in 2006-2010 inSBI 85000 .i hv started to pay the interest monthlywise proprly during my college studies. inbetween i am not paid the amount proper.finally the amount touch to lakhs something.i get a call from branch manager and he told me to repay the loan amount.some bulk amount i deposited to that account afterthat i pay monthly 5000 they cut from my salary.balance amount was nearly 30000.nw my father went to bank and ask abt my loan balance, they told to my father no need to pay the balance amount it was cancel by government.my doubt was in future they again ask to pay the balance amount r not.its true are not.if they cancell my loan account means they give cancell certificate r not.
    pls leave me a reply

    Reply
    • admin on

      Hi Ramarajan, your bank statement should show zero balance in your loan account. Alternatively you could write to your bank and ask them to acknowledge that the loan has been fully paid up and no dues remain.

      Reply
  16. prashant on

    Sir i have taken an educational loan of amount 3 lakh in 2008 and my father who is a government teacher was guarnter of that loan . After 1 march 2014 they were paying an emi of 11000 per month since last few months he was suffering from some mental problem and from last month he is missing and i loadge a fir about there missing and now whole of my family depends on my salary there are any rule or scheme to wavier my loan or minimum amount to be paid by me for disclose my loan accont

    Reply
  17. NANDINI on

    dear sir i have taken education loan rs. 200000 in the year 2008-09 i didnot paid any single rupee . just i want to know abt that the finance minister p chidambar had announced that the repayment of education loan will be taken without interest .

    now our bank manager forcing me and my family people to repaymet the loan with full interest but i want to know the scheme is there or not , it is aplicable to me or not plz reply me immediately im in trouble and i want fully clarification

    thank u

    Reply
  18. Roshan bandal on

    Dear sir I have taken education loan of 300000 RS for education period 2013-2016.
    Is that above scheme is applicable for me.
    I am waited for your ans.

    Reply
  19. usha on

    Dear sir I took loan in the year 2012. My course completed on July 2014 and after the course I paid little amount of the loan. Whether am eligible to get the subsidy? My family income us less. How to apply for subsidy if so. I called bank they told they simply told they will apply. And not responding properly,

    Reply
  20. Ganesh on

    Hello sir,

    I have taken a loan amount of rs.2 Lakh 77 thousand . After hearing this scheme I went to the respective bank where I applied for loan thinking that I will have to pay only the LOAN AMOUNT but to my surprise the bank manager asked me to pay a total of rs.3,99,000. He asked me to pay including the full interest. I’m very confused. Will the Central Government pay for us ? If so , when ?
    This is really spoiling my days. Please do reply to my concern sir.

    Thanks,
    Ganesh.

    Reply
    • admin on

      Ganesh check the links we have shared above in one of the recent replies which have the details of the scheme. Use these to talk to your bank.

      Reply

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