[India_Vision_2020] All banks mislead students on interest subsidy scheme - Government scheme not implemented properly ~ India Vision 2020

Hi all

Education Loan Task Force (ELTF), under Action 2020 and a wing of online India Vision Group has been creating public awareness about education loan among students and parents. We have been talking for a long time about the mismanagement of interest subsidy scheme by the banks.

The Government of India provides 100% interest subsidy to all the eligible students till the end of moratorium period. The students (annual parental income less than 4.50 lakhs) who are granted education loan under IBA scheme to study professional and technical courses are eligible under the Central Government's Interest Subsidy Scheme (CSIS). The students should give an income certificate from the competent authorities like Thasildar, notified by the Goverment. In that case, the lending banks will claim the full interest from the Government through the nodal bank Canara Bank. The students need not pay any interest (even a single rupee) till the end of moratorium period. (study period plus one year or six months after getting emloyment, whichever is earlier). The Banks have to charge interest and collect from the student only after the moratorium period.

ELTF has been receiving lot of complaints about the students not getting interest subsidy properly.

a) Most of the bank managers mislead the students that the scheme itself is not implemented;

b) Many Banks do not claim interest subsidy for eligible students within the stipulated time. They do not advise the students to submit the relevant documents for claiming interest subsidy.

c) Even if interest subsidy is claimed, only part amount is claimed from the Government and collect the balance interest from the student, in violation of the scheme.

d) In many branches, though the banks have claimed interest subsidy, they also collect the interest from the students.

In our estimate, more than 99% of the Bank branches do not follow the guidelines and do not pass on the benefits to the poor students. ELTF has taken up several times, quoting instances with individual banks, RBI and IBA. While the banks sort out the grievance of that particular complainant, they do not bother about streaming the system.

ELTF is supported by many MPs of different parties. They also took up the issues in Parliament. ELTF has been demanding CAG audit or RBI audit of all the eligible education loan accounts to ensure that the Government scheme is implemented properly. Many of the guidelines are violated by all the Banks.

Last month, when I met Mr Hansraj G Ahir, one of the top performing MP (Sansad Ratna Award winner for the past four years), I discussed with him fully the issues faced by the students. He is also the whistle blower of the Coal scam, that is rocking the country. He sniffed the coal scam in 2005 and conducted deep investigations and then brought to light.

On our request, he immediately wrote a detailed letter to Dr Manmohan Singh, Prime Minister, explaining the various difficulties faced by the students. Now Prime Minister forwarded that letter to Ministry of HRD, who administer the interest subsidy scheme. Now Ministry of HRD has called for report from the various stakeholders like RBI, IBA and the nodal bank Canara Bank. Ministry of HRD also requested me to write to them the problems faced by the students. We have also written to Ministry of HRD the problems faced by the students.

Today IANS (one of the leading wire agencies of India) has put out a story on this issue. This story is picked up by various media now both online and in print.

ELTF strongly feels that most of the education loan borrowers are mislead by the banks. Even the authorities are not able to do anything.

Now that we have taken up with Prime Minister level, we are confident that something may emerge.

K. Srinivasan

Moderator : India Vision Group, Action 2020 Group

Convenor: Education Loan Task Force (ELTF)

Please read the IANS Story:

http://newindianexpress.com/states/tamil_nadu/BJP-plans-to-edge-Congress-over-education-loan-issue/2013/10/18/article1842452.ece

BJP plans to edge Congress over education loan issue

By IANS - CHENNAI Published: 18th October 2013 12:14 PM Last Updated: 18th October 2013 12:14 PM

The Bharatiya Janata Party (BJP) plans to edge the central government out over the issue of education loan as the nationalised banks do not show much interest in its disbursal, said a party leader Friday.

Banks also do not pass on the interest subsidy to eligible poor borrowers and shame the students by pasting their pictures on the branch notice boards when they default on dues.

"The Lok Sabha elections are round-the-corner and we have decided to take the issue against the UPA (United Progressive Alliance) government and create awareness among the people and majorly among the youth," BJP's member of parliament (MP) from Maharashtra Hansraj Gangaram Ahir told IANS.

At the state level also, BJP office-bearers are planning to raise the problems faced by students in getting education loan.

"On one hand the government says it cares for all the sections of the society, but no provision is made for the funds for the educational loan scheme being implemented by the government," Ahir said.

In a letter to Prime Minister Manmohan Singh Sep 4, Ahir highlighted students' problems in getting education loans and interest subsidy, among others.

The human resource development (HRD) ministry was looking into the issue of non-payment of interest subsidy to eligible borrowers and other issues related to the loan, he said.

The education loan is one of the pet schemes of union finance minister P.Chidambaram who boasts of it at public meetings.

The scanty provision of funds has deprived lakhs of students and youth from pursuing their education.

"The total education loan portfolio for the banking sector as on March 31, 2013, is around Rs.53,000 crore in around 25 lakh accounts," convener of Education Loan Task Force (ELTF), K. Srinivasan said.

ELTF guides students on rules and regulations governing the education loans offered by nationalised banks.

Srinivasan said under the interest subsidy scheme, the centre would reimburse the banks the interest due on the loan amount till the end of one year from the date of completion of the course or six months from the date on which the student lands a job after his course -- whichever is earlier.

The centre would reimburse the interest to those students whose parental income is less than Rs.450,000 per annum, and on loans which are available only for professional and technical courses and not for arts/science and students of diploma course, Srinivasan said.

Citing union budget documents, he said during 2011-12, Rs.697 crore was allotted for the loan's interest subsidy. Between 2012-13 and 2013-14, Rs.800 crore and Rs.1,100 crore have been allocated.

"Based on the complaints received by ELTF, many students have not been getting interest subsidy from many banks. There are bank managers who even fob off the borrowers denying any such interest subsidy scheme," Srinivasan remarked.

He said Canara Bank is the nodal agency for setting the bank's claims under the interest subsidy scheme for a fee and it would claim the amount from the HRD ministry.

"I understand the Rs.1,100 crore allocation for this fiscal has already been exhausted," he added.

Under the Indian Bank's Association (IBA) guideline loan repayment could be done over 10 to 15 year period, Srinivasan said.

"But banks force the students to pay within three/five years. With the poor economic situation and the lack of employment opportunities, the students are not able to pay huge monthly dues. The banks then classify the accounts as non-performing and give a negative public image about this portfolio," he said.

"We appreciate the interest subsidy scheme, but the way in which the interest subsidy is managed needs to be thoroughly audited by Comptroller and Auditor General (CAG) or by the Reserve Bank of India (RBI)," the ELTF convener said.

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