What is a Skill Loan?

This loan helps students who have secured admission into technical courses offered by training institutes, polytechnics, schools or colleges approved by the State or Central Government for technical education to pay their course fees. The loan amount starts from Rs. 5,000 and can go up to Rs. 1.5 lakh depending on the duration of the course.

Features of IBA Skill Loan Scheme for Technical Courses

• The scheme was introduced in July 2015 by the Govt. to provide institutional credit to students for skill development courses that were aligned to National Occupations Standards and Qualification Packs
• The loan is meant for you if you have gained admission into a programme offered by a polytechnic, Industrial Training Institute (ITI), school, college, etc. in India offering technical courses that are aligned with the National Skill Qualification Framework (NSQF)
• The banks disburse the IBA Skill Loan Scheme as a series of payments over the required number of terms or years to pay the course fees or other approved charges
• There is no minimum course duration

Skill Loan – Loan Amount

• The minimum loan amount starts from Rs. 5,000 and the maximum amount can go upto Rs. 1.5 lakh depending on the duration of the course
  • Courses up to 3 Months: For these courses, the maximum loan amount available will be Rs. 50,000
  • Courses of 3 to 6 Months: For these courses, the maximum loan amount available will be Rs. 75,000
  • Courses from 6 Months to 1 Year: For these courses, the maximum loan amount available will be Rs. 1 lakh
  • Courses of Duration More than 1 Year: For these courses, the maximum loan amount available will be Rs. 1.5 lakh

Skill Loan – Interest Rates

• The interest rate applicable to these loans depends on the Marginal Cost of Funds based Lending Rate (MCLR) and a premium add-on factor of at most 1.50%

Skill Loan – Repayment and Moratorium Period

• Repayment Period
  • Loans of upto Rs. 50,000: Repayment period is upto 3 years after course completion
  • Loans between Rs. 50,000 and 1 lakh: Repayment period is upto 5 years after course completion
  • Loans above Rs. 1 lakh: Repayment period is upto 7 years after course completion
• Moratorium: The repayment moratorium for Skill Loans is usually limited to the course period. However, lending banks may offer an additional grace period of 6 months or 12 months after date of completion of the course

Skill Loan – Security Needed

• No collateral security or third party guarantee is required
• Assignment of future income of the student (after completing the course) and co-obligation of parents is required

Skill Loan – 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)

Skill Loan – Eligible Courses

• All courses run by institutions that are aligned with the National Skill Qualification Framework (NSQF) are eligible

Skill Loan – Margin Money (Borrower Contribution to the Total Cost)

• The borrower does not have to offer any 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 and the margin is 10%. This means the borrowers will have to contribute Rs 1 lakh (10% of Rs. 10 lakh) towards the cost of the course while the bank will offer the rest.

Skill Loan – Processing and Other Charges

• There are no processing or documentation charges for this loan

Uses of the Skill Loan

• The loan amount can be used to pay any fees or other charges that are required to successfully complete the course
• The loan can also be met to cover examination, library and laboratory fees
• It also covers any caution deposit fees
• It can also be used to buy books or equipment or instrument needed for the course

Skill Loan – Other Features to Know

• The lender bank may ask the borrower to submit progress report 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)
• The borrower can repay the loan from any time without having to pay any prepayment charges

Skill Loan – Documents Needed

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