Source: BusinessStandard

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Context

• Finance Minister announced significant revisions to the Model Skill Loan Scheme and introduced new initiatives aimed at enhancing access to higher education and skill development in India.

Details

• Revised Skill Loan Scheme:
  • Loan Amount: Increased to facilitate loans up to ₹7.5 lakh.
  • Guarantee: Backed by a guarantee from a government-promoted fund.
  • Beneficiaries: Expected to benefit 25,000 students annually.
• Higher Education Loans for Underprivileged Students:
  • Loan Amount: E-vouchers for loans up to ₹10 lakh for higher education in domestic institutions.
  • Eligibility: Targeted at students who do not qualify for existing schemes.
  • Interest Subvention: Annual interest subvention of 3% of the loan amount.
  • Beneficiaries: Directly benefit 100,000 students every year.
• Budget Allocation for Education, Employment, and Skilling:
  • Total Allocation: ₹1.48 trillion.
  • Comparison: Significant increase from the previous allocation of ₹1.2 trillion in the Interim Budget.

Objectives and Expected Impact

• Skill Development:
  • Enhances access to financial resources for students pursuing technical and skill-based education.
  • Aims to promote self-reliance and entrepreneurship among the youth.
• Higher Education:
  • Provides substantial financial support for higher education, making it more accessible to underprivileged students.
  • Encourages students to pursue higher education without financial constraints, aligning with the goal of fostering a skilled and educated workforce.
• Economic Growth:
  • Supports the broader initiatives of the government, such as the Make in Bharat campaign.
  • Promotes domestic education, potentially reducing the need for foreign education and retaining talent within the country.

Detailed Breakdown of the Skill Loan Scheme

• Eligibility Criteria: Admission to courses conducted by recognized institutions such as ITIs, polytechnics, schools recognized by State or Central Boards, colleges affiliated to recognized universities, or training partners affiliated with Sector Skill Councils, NSDC, State Skill Missions, or State Skill Corporations.
• Loan Features:
  • Covers tuition fees, examination fees, library and laboratory fees, and other necessary expenses like the purchase of books and equipment.
  • Boarding and lodging costs may also be covered.
• Interest Rates: Typically, the base rate or MCLR of the bank plus an add-on of up to 1.5%.
• Repayment Terms:
  • Loans up to ₹50,000: Repayment within 3 years.
  • Loans between ₹50,000 to ₹1 lakh: Repayment within 5 years.
  • Loans above ₹1 lakh: Repayment within 7 years.
  • Moratorium period of up to 6-12 months post-completion of the course, depending on the duration of the course.
• Security and Collateral:
  • No collateral or third-party guarantee required.
  • Covered by the Credit Guarantee Fund Scheme for Skill Development (CGFSSL).

Application Process

• Eligible Banks: Banks participating in the scheme include major public sector and private banks as members of the Indian Banks' Association (IBA) and other financial institutions approved by the Reserve Bank of India (RBI).
• Application Steps:
  • Contact a participating bank or financial institution.
  • Submit required documentation including proof of admission and identity.
  • Co-borrower (parent or guardian) is necessary if the student is a minor.
• Disbursement: The loan amount is directly disbursed to the educational institution.

Must read articles:

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Sources:

BusinessStandard

PRACTICE QUESTION Q: Evaluate the effectiveness of the Skill Loan Scheme in India. How does it support the government's objective of skill development and employment generation? Discuss the challenges and potential improvements to make the scheme more accessible and impactful. (250 Words)