The CGFSEL Education Loan Scheme is an initiative by the National Credit Guarantee Trustee Company Ltd. (NCGTC), which was set-up by the Department of Financial Services, Ministry of Finance, Government of India in 2015. This scheme provides educational loans of up to INR 7.5 lakh to help students pursue higher education in India and abroad, even if they do not have the necessary collateral or third-party guarantee for their loan.
The Credit Guarantee Fund Scheme for Education Loans (CGFSEL) ensures that if a borrower is unable to repay their loan, the National Credit Guarantee Trustee Company Ltd. (NCGTC) will cover 75% of the defaulted amount. This helps provide a safety net against default.
Additionally, the interest rates on these loans are set at 2% over the base rate*, further easing the financial burden on students. Furthermore, loans of up to INR 4 lakh do not require any margin**.
However, loan amounts exceeding INR 4 lakh require a 5% margin for studies within India and a 15% margin for studies abroad. In simple words, for loan amounts above INR 4 lakh, borrowers must contribute 5% of the loan amount for studies in India and 15% of the loan amount for studies abroad. The scheme is applicable to loans obtained under the Model Education Loan Scheme of the Indian Banks’ Association (IBA).
This article provides information about the scheme’s eligibility criteria, a detailed list of participating banks, required documents, and other important details.
Base Rate* – It serves as a reference for the calculation of interest rates on loan amounts. When individuals apply for loans, lending institutions take into account the base rate and then add an additional percentage or margin to determine the final interest rate applicable to the approved loan.
In simple words, the base rate is the minimum interest rate that a bank can charge on loans. It is set by the Reserve Bank of India (RBI). When you apply for a loan, the bank will add a margin to the base rate to determine the final interest rate that you will pay. The margin is the bank’s profit. For example, if the base rate is 5% and the bank’s margin is 2%, then the final interest rate that you will pay will be 7%.
Margin** – It refers to the portion of the loan amount that is required to be financed by the borrower themselves.
Simply put, when you take out an education loan, the bank does not give you the full amount of money you need. Instead, you have to pay a certain percentage of the loan amount yourself. This is called the margin. For example, if you need a loan of INR 10 lakh for your education, the bank may require you to pay a margin of 10%. This means that you will have to pay INR 1 lakh yourself, and the bank will lend you the remaining INR 9 lakh.
CGFSEL Education Loan Scheme – Highlights
|Name of the Scheme||Credit Guarantee Fund Scheme for Education Loans (CGFSEL)|
|Launched By||Department of Higher Education, Government of India|
|Benefits||Guarantee for educational loan of up to INR 7.5 lakh|
|Loan Repayment Period||Up to 15 years|
|Interest Rate||2% over the base rate|
CGFSEL Education Loan – Participating Banks
The scheme partners with esteemed regional, private, and public sector banks to provide financial assistance to students pursuing higher education in India and abroad. Some of the collaborating banks are mentioned below.
Regional Rural Banks:
- Andhra Pragathi Grameena Bank
- Chaitanya Godawari Grameena Bank
- Saptagiri Grameena Bank
- Chhattisgarh Rajya Gramin Bank
- Baroda Gujarat Gramin Bank
- Saurashtra Gramin Bank
- Sarva Haryana Gramin Bank
- Himachal Pradesh Gramin Bank
- Jharkhand Rajya Gramin Bank
- Karnataka Vikas Grameena Bank
- Kerala Gramin Bank
- Maharashtra Gramin Bank
- Meghalaya Rural Bank
- Mizoram Rural Bank
- Puduvai Bharathiyar Grama Bank
- Punjab Gramin Bank
- Baroda Rajasthan Kshetriya Gramin Bank
- Rajasthan Marudhara Gramin Bank
- Tamil Nadu Grama Bank
- Andhra Pradesh Grameena Vikas Bank
- Telangana Grameena Bank
- Uttar Banga Kshetriya Gramin Bank
- Tripura Gramin Bank
- Aryavart Bank
- Baroda U.P. Bank
- Prathama U.P Gramin Bank
- Uttarakhand Gramin Bank
Public Sector Banks:
- Bank of India
- Bank of Baroda
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Indian Bank
- Indian Overseas Bank
- Punjab & Sind Bank
- Punjab National Bank
- State Bank of India
- UCO Bank
- Union Bank of India
Private Sector Banks:
- Dhanlaxmi Bank
- Jammu & Kashmir Bank
- Karnataka Bank Ltd.
- Tamilnad Mercantile Bank Ltd.
- The Karur Vysya Bank Limited
- The South Indian Bank Ltd.
CGFSEL Education Loan Scheme – Important Features
- The National Credit Guarantee Trustee Company (NCGTC) provides a guarantee to lending institutions (such as banks) for education loans given to eligible borrowers up to INR 7.5 lakh.
- This guarantee ensures that if the borrower defaults on repaying the loan, NCGTC will cover the outstanding amount on behalf of the borrower to the lending institution.
- The lending institution will evaluate and approve education loans for higher studies in India and abroad.
- NCGTC has the power to decide whether or not to approve any loan proposal that is sent to it by the Bank, even if it meets all of the Scheme’s requirements.
- The borrower doesn’t need to provide additional assets (collateral) or people to guarantee the loan.
- The lending institution is responsible for paying the annual guarantee fee based on the outstanding loan amount.
- The Member Lending Institutions (MLIs) can charge interest rates up to 2% per annum over the base rate.
- If a lending institution submits an eligible claim to NCGTC, NCGTC will pay 75% of the guaranteed amount within 30 days. The remaining 25% of the guaranteed amount will be paid after the lending institution provides a certificate stating that all efforts to recover the amount have been unsuccessful.
- The education loan doesn’t have any additional coverage and is not covered by the government, general insurers, or any other insurance providers.
CGFSEL Education Loan – Eligibility Criteria
To be eligible for the scheme, students must meet the below-mentioned criteria:
- The applicants must be Indian nationals.
- Applicants should have completed Higher Secondary Education (HSC), i.e., Class 12 or equivalent class.
- Candidates should have secured admission to a higher education course in recognized institutions in India or abroad.
- Admission should be based on an entrance test or a merit-based selection process after completing Class 12.
- Admission to postgraduate courses or research programs may not be solely based on marks obtained in the qualifying examination. Instead, other factors such as entrance tests or selection processes may be considered for determining eligibility and admission.
Quantitative Eligibility Criteria
- The borrower’s loan account should not have any overdue payments as of the material date. The material date is a specific date that is used for reference in a loan agreement or other financial document. It is typically the date on which the loan is disbursed.
- For loan amounts up to INR 4 lakh, no margin is required. However, for loan amounts beyond INR 4 lakh, a margin of 5% is applicable to study in India and 15% for study abroad.
CGFSEL Education Loan Scheme – Eligible Courses
The Indian Banks Association (IBA) under its Model Education Loan Scheme has provided the indicative list of courses that are generally eligible for education loans. However, it is always important to consult with the specific bank or lending institution for the definitive list of approved courses and institutions under their loan scheme.
For Studies in India
- Approved courses conducted by recognized colleges/universities that are recognized by UGC/Government/AICTE/AIBMS/ICMR, etc., leading to graduate/postgraduate degrees and PG diplomas.
- Professional courses such as Institute of Cost Accountants of India (ICWA), Chartered Accountant (CA), and Chartered Financial Analyst (CFA), among others.
- Courses conducted by prestigious institutions like IIMs, IITs, IISc, XLRI, NIFT, NID, etc.
- Regular degree/diploma courses including Aeronautical, pilot training, shipping, and nursing or any other discipline approved by the Director General of Civil Aviation/Shipping/Indian Nursing Council or any other regulatory body.
- Approved courses offered in India by reputed foreign universities.
For Studies Abroad
- For graduation, education loans are available for job-oriented professional/technical courses offered by reputed universities.
- For postgraduation, education loans cover programs like MCA, MBA, MS, and other equivalent degrees.
- Education loans may also be available for courses conducted by professional bodies such as CIMA in London, CPA in the USA, and similar institutions.
- Degree/diploma courses are eligible for loans if they are recognized by competent regulatory bodies in India/abroad for employment across India or abroad. This includes fields like aeronautical studies, pilot training, shipping, and others.
CGFSEL Education Loan Scheme – Considered Expenses
- Education loan covers college/school/hostel/examination/library/laboratory fees.
- For students studying abroad, travel expenses/passage money can be included in the loan.
- Insurance premiums for the student borrower may be covered if applicable.
- Caution deposits, building funds/refundable deposits supported by institution bills/receipts may be considered.
- The purchase of books/equipment/instruments/uniforms can be included in the loan amount.
- If a computer is required for the course, it can be purchased at a reasonable cost and included in the loan.
- Other expenses necessary to complete the course, such as study tours, project work, and thesis, may also be covered.
- Scholarships or fee waivers received by the student borrower may be taken into account when calculating the loan amount.
- Fees for management quota seats will be considered as approved by the State Government/Government-approved regulatory body, subject to repayment feasibility.
- Reasonable lodging and boarding charges may be considered for students opting for outside accommodation.
- Some expenses may be limited to a certain percentage of the total tuition fees, such as 10% for specific expenses and a maximum of 20% for items like books, equipment, and other requirements not specified in the college’s fee schedule.
CGFSEL Education Loan Scheme – Security Amount
When applying for an education loan under the Model Education Loan Scheme of the IBA, the security requirements may vary based on the loan amount. The purpose of these security measures is to ensure repayment and mitigate risks for the lending institution. Below-mentioned are the security requirements for different loan amounts:
1. Loan amount up to INR 4 lakh –
- Parents are required to be joint borrowers.
- No collateral security or third-party guarantee is needed.
2. Loan amounts above INR 4 lakh and up to INR 7.5 lakh –
- Besides the parents as joint borrowers, collateral security in the form of a suitable third-party guarantee will be taken.
- In exceptional cases, the bank may waive the requirement of a third-party guarantee if it is satisfied with the net worth or means of the parent(s) who will be joint borrowers.
3. Loan amount above INR 7.5 lakh –
- Parents are required to be joint borrowers.
- Tangible collateral security of suitable value, acceptable to the bank, is needed.
- The student’s future income will be assigned for the payment of instalments.
CGFSEL Education Loan Scheme – Loan Repayment
Below-mentioned are the specific guidelines for the repayment of loans by the Credit Guarantee Fund Scheme –
- Moratorium Period – This includes the length of the course period plus one year or six months after securing a job, whichever comes earlier.
- Extensions for Completing the Course – If a student cannot complete the course within the scheduled time, extensions of up to 2 years may be granted.
- Discontinuation of the Course – In cases where a student discontinues the course midway, the bank will work out an appropriate repayment schedule in consultation with the student and parent.
- Interest Concession – Banks may offer a 1% interest discount/concession if borrowers pay the interest during their studies and the moratorium period before repayment begins.
- Repayment Period: The repayment period for loans up to INR 7.5 lakh is up to 10 years, while for loans above INR 7.5 lakh, it is up to 15 years.
- Repayment Mode: Students will be required to repay the education loan in equal monthly instalments (EMIs). Furthermore, no penalty will be charged to students for prepaying the loan at any time during the repayment period.
|Note – To read the complete information regarding the Credit Guarantee Fund Scheme, please visit the official notification released by the Indian Banks’ Association.|
CGFSEL Education Loan Scheme – Application Process
The applications can be submitted either directly at bank branches or through online mode. However, to apply for the scheme online, students are required to follow the below-mentioned application process:
Step 1) Visit the Vidya Lakshmi portal – vidyalakshmi.co.in to fill out the online application form for the Credit Guarantee Fund Scheme.
Step 2) Click on the ‘Register’ tab and fill out the required details to create an account.
Step 3) After submitting the details, click the ‘Student Login’ tab and enter the registered email ID, password and captcha code.
Step 4) Navigate to the ‘Login’ tab and fill out the application form which includes name, email ID, phone number, and other important documents.
Step 5) After submitting, download the application form for future reference.
CGFSEL Education Loan – Important Links
CGFSEL Education Loan Scheme – FAQs
Are there any interest rate concessions available under the CGFSEL scheme?
Yes, under the CGFSEL scheme, an interest rate concession of 2% over the base rate is provided for education loans up to INR 7.5 lakh.
How can students apply for CGFSEL Education Loan?
Students can apply for CGFSEL Education Loan either directly at bank branches or through online mode. They need to submit a duly completed application form along with the required supporting documents mentioned by banks.
Can I apply for Credit Guarantee Fund Scheme for a distance learning or online course?
Yes, students can apply for Credit Guarantee Fund Scheme for distance learning or online courses, provided the course is approved by a recognized educational institution or authority.
Is there an age limit for availing the CGFSEL Education Loan?
There is no specific age limit mentioned for availing the CGFSEL Education Loan. However, banks may have their own age criteria and policies that applicants need to fulfil.
Can I prepay the loan amount of the Credit Guarantee Fund Scheme before the completion of tenure?
Yes, borrowers have the option to prepay or foreclose the CGFSEL Education Loan before the completion of the loan tenure. However, it is important to check with the lending institution regarding any prepayment penalties or charges that may apply.