CENTRAL SECTOR SCHEME FOR INTEREST SUBSIDY ON EDUCATIONAL LOANS

PRESS INFORMATION BUREAU
GOVERNMENT OF INDIA
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CENTRAL SECTOR SCHEME FOR INTEREST SUBSIDY ON EDUCATIONAL LOANS

New Delhi: August 18, 2010

The Central Government has launched a new Central Scheme to provide full interest subsidy during the period of moratorium on educational loans for students belonging to economically weaker sections (with parental family income from all sources of less than Rs.4.5 lakh annually) from scheduled banks under the Educational Loan Scheme of the Indian Banks’ Association (IBA) for pursuing courses of studies in professional/technical streams from recognized institutions in India.

The Scheme is effective for all IBA approved educational loans sanctioned to eligible students in respect of courses of studies in technical and professional streams from recognized institutions in India, from the academic year 2009-10. This Scheme is an overlay of the existing IBA Education Loan Scheme.

The modalities have been finalized in consultation with the Indian Banks’ Association and circulated to all member banks for implementation. Under the Scheme, proof of income is required to be certified by authorities to be designated by the State Governments. Accordingly, the Ministry has written to all Chief Secretaries of States/Union Territories to intimate the designated authority / authorities (at the District/Sub-District/Block, etc. levels) to the District Level Consultative Committee (DLCC) so that banking authorities at the branch level where students would be approaching for availing the benefit of the scheme would be aware of the same.

Eligible students who wish to avail of the benefits of the Scheme can approach the respective bank branch from where they availed of the education loan and complete the necessary formalities including obtaining the certification in respect of annual family income from the competent authority at the Block/Tehsil/District Level, so that the individual student accounts could be credited with the interest due on the loan for the academic year 2009-10 onwards.

Canara Bank is the nodal Bank, for the member Banks of IBA, for claiming reimbursement of interest credited to student accounts.

The details of the Scheme as well as the above communications are available on the website of this Ministry at www.education.nic.in. The Scheme is effective from 1.4.2009.

Source: PIB

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1% interest subvention on housing loans upto Rs.10 lakh

The Cabinet today approved the Scheme of 1% interest subvention on housing loans up to Rs.10 lakh and the allocation of a sum of Rs.1000 crore for the Scheme.

Point-wide Details

• Interest subvention of 1 percent will be made available on individual housing loans upto Rs.10 lakh for construction / purchase of a new house or extension of an existing house provided the cost of the construction/price of the new house/extension does not exceed Rs. 20 lakh.

• The Scheme will be implemented through Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) registered with the National Housing Bank (NHB).

• The first twelve instalments of all such loans sanctioned and disbursed during the period of twelve months from the date of publication of the scheme will be eligible for interest subvention.

• Subsidy of one percent will be computed for 12 months on disbursed amount and adjusted upfront in the principal outstanding irrespective of whether the loan is on fixed or floating rate basis.

• Reserve Bank of India (RBI) will be designated the nodal agency for SCBs and National Housing Bank (NHB) will be designated the nodal agency for HFCs.

Background

There has been a notable deceleration in the sectoral flow of credit to the housing sector which is attributable to increase in the price of houses, slackening of income growth and a rise in interest rates for housing loans.

The Finance Minister in his reply to the debate on the Finance Bill in the Lok Sabha on 27th July, 2009 made the announcement that housing, particularly lower and middle income housing, deserved to be supported. In order to stimulate this segment of house owners, he proposed to provide support to borrowers by way of interest subvention of 1% on all housing loans up to Rs.10 lakh to individuals, provided the cost of the house does not exceed Rs.20 lakh.

Implementation Strategy and targets

All Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) will submit a monthly consolidated return to the Reserve Bank of India (RBI) and National Housing Bank (NHB) respectively, specifying interest subvention given.

The nodal agencies will put up a demand to the Government of India for release of subsidy amount and the Government of India in turn will sanction and release the subsidy amount based on demand received.

The number of beneficiaries covered under the scheme will depend, interalia, upon the size of the loan amount and the number of beneficiaries approaching the nodal agency for interest subvention. Being a demand driven scheme no specific targets for coverage of beneficiaries have been fixed.

Major Impact:

It is expected that cut in interest rates should reduce Equated Monthly Instalments (EMIs) of borrowers and create additional demand for housing. This in turn should stimulate demand in construction industry as well as industries such as steel & cement having employment potential and income multiplier effect.

Expenditure involved:

An amount of Rs.1000 crore will be allocated in the Budget for the year 2009-10 for implementation of the Scheme.

No. of beneficiaries:

On a housing loan of Rs.10 lakh, the 1% interest relief available wil amount to Rs.10,000/- per account. As such, the Scheme of a size of Rs.1000 crore is expected to cover 10 lakh beneficiaries in one year period.

States/Districts covered:

The scheme will cover all States & Union Territories of the country, including rural & urban areas.

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