IBA Model Education Loan Scheme

The Indian Banks’ Association (IBA) formulated a comprehensive IBA Model Education Loan Scheme model in 2009 that scheduled banks in India could adopt. The model formed the basis for a loan that can be offered to Indian students who want to study in India and abroad at undergraduate, postgraduate and doctorate levels. Eligible students, i.e. students belonging to Economically Weaker Sections (EWS) of society, could avail of the Central Sector Interest Subsidy (CSIS) Scheme on interest charged on these loans during the moratorium period.

What is the IBA Model Education Loan Scheme?

The IBA Model Education loan helps students who want to pursue higher studies in India and abroad afford the cost of the course and related expenses. The maximum loan amount sanctioned by all scheduled banks for this loan scheme is Rs. 10 lakh for studying in India and Rs. 20 lakh for studying abroad. Students belonging to the Economically Weaker Sections of society can reduce their debt burden by availing of interest subsidy on this loan under the Central Sector Interest Subsidy (CSIS) Scheme.

Features of IBA Model Education Loan Scheme for Pursuing Higher Studies in India and Abroad

• The loan is meant to help students fulfil their dreams of pursuing higher education in India or abroad. Students belonging to EWS category can reduce their debt burden with the Central Sector Interest Subsidy (CSIS) Scheme
• The loan is disbursed as a series of payments over the required number of years and not as a lump sum
• It can be taken for all institution fees as well as related expenses including for the purchase of books, laptops, etc. or payment of hostel fees, lab fees, examination fees, and so on
• All scheduled banks in India offer (at least) one loan scheme based on the IBA Model Education Loan scheme

IBA Model Education Loan Scheme – Loan Amount

• The maximum loan amount sanctioned by scheduled banks offering loan schemes based on the IBA Model Education Loan scheme is Rs. 10 lakh for studying in India and Rs. 20 lakh for studying abroad

IBA Model Education Loan Scheme – Interest

• The interest rate applicable to these loans depends on the Base or Repo Rate as well as the provisions under the IBA Model Education Loan schemes
• Usually, simple interest is levied by scheduled banks during the moratorium period if interest is serviced during the period
• Scheduled banks offer interest concession of 0.5% – 1.0% if interest is serviced during the moratorium period
• Girl students can get a concession of 0.5% on the standard interest rate applicable to the loan

Note: Students belonging to families with an annual gross income of Rs. 4.5 lakh or less are eligible for interest subsidy under CSIS scheme. If you are interested, you can check out our Central Sector Interest Subsidy page.

IBA Model Education Loan Scheme – Repayment

• The loan amount for IBA Model Education Loans is repayable in equated monthly instalments up to a period of 15 years after the end of the moratorium period
• This means that you pay only interest during the moratorium period and then EMIs every month until the complete repayment of the loan
• The moratorium period for this loan scheme is course period plus 12 months after the completion of the course or course period plus 6 months after landing a job, whichever is earlier

Security Needed

• For loans up to Rs. 7.5 lakh: No collateral security is required. The loan will be covered under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) subject to the conditions
• For loans above Rs. 7.5 lakh: Tangible collateral security that covers at least the quantum of the loan is required

IBA Model Education Loan Scheme – Eligibility

• The applicant must be a resident Indian national (Indian citizens who have stayed in the country for over 180 days in the last financial year)

IBA Model Education Loan Scheme – Eligible Courses

• Graduate, postgraduate, including technical or professional courses from reputed colleges or universities approved by UGC, State or Central Government, AICTE, Department of Electronics, IMC, autonomous institutions like IIM, IIT, etc.
• Courses in India leading to a degree or a diploma from reputed institutes, colleges or universities 
• Foreign courses which lead to graduate or postgraduate degree or diploma, PhD, etc.

Margin Money (Borrower Contribution to the Total Cost)

• Loans up to Rs. 4 lakh: The borrower does not have to offer any margin money to get the loan
• Loans above Rs. 4 lakh to Study in India: The borrower must offer 5% of the loan amount as margin money to get the loan
• Loans above Rs. 4 lakh to Study Abroad: The borrower must offer 15% of the loan amount as margin money to get the loan

Note: Margin money refers to the amount the borrower contributes to the overall amount required. Suppose a course costs Rs. 10 lakh. Here a student studying in India will have to pay Rs. 50,000 (5% of Rs. 10 lakh) while another student studying abroad has to provide a margin money of Rs. 1.5 lakh (15% of Rs. 10 lakh). The lender bank offers the rest.

Processing and Other Charges

• There are no processing or documentation charges for this loan

IBA Model Education Loan Scheme – Uses of the Loan

• College, school and hostel fees
• Examination, library and laboratory fees
• Insurance premium for the borrower student, if applicable
• Travel expenses including any passage money for foreign studies
• Caution deposit, building fund or refundable deposit supported by institution bills or receipts
• Cost of books, equipment, instruments, uniforms
• For purchase of computer, if required for the course
• Other expenses needed for completing the course such as study tours, project work, thesis, etc.

Other Features to Know

• The loan is granted jointly with the parent or guardian (co-borrower) of the applicant
• The lender bank may ask the borrower to submit progress reports during the course
• The loan is disbursed directly to the school, bookseller or publisher, computer seller, and so on and not to the applicant(s)
• Also, the borrower should submit the loan application to the bank branch near the educational institute where they want to study or nearest to the residence of parents
• Canara Bank is the nodal bank for this IBA Model Education Loan Scheme

Documents Needed

• Application Form duly filled and signed by applicant and guarantor along with details of applicant and guarantor and family
• Two Passport Size Photographs of student, applicant and guarantor
• Photocopy of PAN Card of the student that needs to be submitted at the time of application or during the course period
• Personal Identification Proofs (Any One): Electoral I-Card, Passport, Driving License, PAN Card or Aadhaar Card
• Residential Address Proof (Any One): Electricity Bill, Landline Telephone Bill, Electoral or Voter ID Card or Passport
• Admission Letter, Course Details and Prospectus
• Fee Details with Demand of Fee by the Institution
• All Proofs of Past Academic Records including Mark Sheets and Certificates