Finance Minister P. Chidambaram has announced a moratorium period for all education loans taken up to March-end 2009 and outstanding at December-end 2013.
In his Interim Budget speech, he said nearly 9 lakh student borrowers will benefit to the tune of approximately Rs 2,600 crore due to the moratorium period.
A sum of Rs 2,600 crore will be provided in the current financial year itself and this amount will be transferred to Canara Bank, the nodal bank for the Central Scheme of Interest Subsidy for Educational Loans.
The Central scheme for interest subsidy was introduced in 2009-10 in respect of education loans disbursed after April 1, 2009. However, students who had borrowed before March-end 2009 struggled to pay interest during the period of study and they deserved some relief, Chidambaram said.
The Government will take over the liability for outstanding interest as on December-end 2013, but the borrower would have to pay interest for the period after January 1, 2014.
At the end of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding was Rs 57,700 crore.