Education loans may come with insurance

New Delhi: Public sector banks will soon start offering insurance-linked education loans. The insurance premium will be a part of the expenses for the loan. The Indian Banks’ Association (IBA) has put together a model education loan scheme that entails a higher quantum of loan.
The loan limit has been increased from Rs 7.5 lakh to Rs 10 lakh for studies in India and from Rs 15 lakh to Rs 20 lakh for studies overseas. Further, there will now be a provision of top-up loan for students for further studies. A cap of sorts has been fixed for the cost of such loans — the rate of interest should not exceed the benchmark prime lending rate (BPLR) for loans up to Rs 4 lakh. For loans over this limit, the rate of interest, should not be more than 100 basis points over the BPLR.
Under the scheme, life policies and mutual fund units will now be treated as permissible security for the loan. Banks can now lend multiple loans to a single family. Education loans will now be offered for aeronautical engineering, pilot training, shipping training as part of eligible courses. The norms will however be stiffer for loans for overseas education. For loans between Rs 4 lakh to Rs 7.5 lakh, banks will impose more restrictive security by including co-obligation of parents.
23/02/08 Priti Patnaik & Deepshikha Sikarwar/Economic Times