|Banks in the country would soon be offering collateral free education loans upto Rs. 7.5 lakh. The move comes after the meeting of finance minister P. Chidambaram with heads of state owned banks.
Currently banks do not ask for any collateral for education loans upto Rs. 4 lakh, and a third party collateral for loans above Rs. 4 lakh upto Rs. 7.5 lakh. For big ticket loans above Rs. 7.5 lakh, the bank requires co-application of the parent/guardian, assignment of future income of the student, and a substantial liquidable asset in form of collateral.
Mr. Chidambaram had earlier asked the banks to review the deficiancies in the education loans. The Indian Banks' Association (IBA) had revised the model educational loan scheme in May 2012. Also the finance minister added that the bank officials would be penalized on wrongful rejection of an eligible loan application, and the application could only be rejected by official ranked higer than receiving officer.
The IBA might also reduce the maximum time limit for processing of loan from 15 days.