A Budget announcement made two years ago on setting up a Credit Guarantee Fund for education loans is yet to become operational, despite getting Cabinet approval last November for ,500-crore fund.
The Finance Ministry recently admitted in the Lok Sabha that the scheme is yet to start. The fund was proposed by the then Finance Minister (now President) Pranab Mukherjee in his 2012-13 Budget. He had said: “To ensure better flow of credit to deserving students, I propose to set up a Credit Guarantee Fund for this purpose.”
The fund will guarantee loans where the interest rate is more than 2 per cent over the base rate. The one-time processing fee is 9.25 per cent of the loan amount, while the guarantee fee is 1 per cent of the outstanding amount.
The management committee for the fund is to be headed by a senior official of the HRD Ministry with members from the Finance Ministry and banks, and also sectoral experts.
Relief To check NPAs in the education loan category, the UPA Government had, earlier this year, announced a moratorium period for all education loans taken up to March 31, 2009, and outstanding on December 31, 2013.
The Government said it would take over liability for outstanding interest as on December 31, 2013 but the borrower would have to pay interest for the period after January 1, 2014. Nearly nine lakh student borrowers would benefit to the tune of roughly ₹2,600 crore.