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Crucial cash for higher studies
Yusuf Begg | October 30, 2003 10:13 IST
For 26-year-old Anurag Tripathi, it was more than fortuitous that he joined Indian School of Business, Hyderabad.
The institute, one of the more expensive B-schools, has arrangements with the HDFC Bank and the State Bank of India to provide students loans to pursue their management studies.
Most banks have simplified procedures for students to take a loan. "Educational loans are part of the priority sector according to the Reserve Bank of India guidelines," says a Central Bank of India official, and goes on to add that most banks are only too willing to help students pursue higher studies.
Oriental Bank of Commerce has taken part in educational exhibitions and television programmes to hardsell its educational loans.
While Indian Bank gives loans for post-school courses, Syndicate Bank and Central Bank of India give loans to students to pursue school education (including the plus-2 stage).
Loans are available for diploma, graduation, post-graduation and doctoral courses.
These courses, however, have to be recognised by the UGC. For management studies, the course has to be approved by the All India Council for Technical Education.
Students opting for loans for computer courses should remember that the institute should be accredited to the Indian government's department of electronics or affiliated to a recognised university.
For students going abroad for studies, loans are available for job-oriented professional or technical courses; students attending courses conducted by Chartered Institute of Management Accountants, London and Chartered Public Accountant in US are also eligible for loans.
Loans are given to meet the costs of tuition and also hostel fees. Examination, laboratory and library fees are also included in the loan amount, as is the money required to buy books, uniforms, computers and other instruments. Most banks also pay the premium for an insurance policy on the life of the borrowing student.
For studies abroad, travel expenses can also be included in the loan amount. Some banks provide for personal expenses (such as airport tax) in cash or traveller's cheques.
For studies in India, banks give a maximum of Rs 750,000 and for those going abroad it is Rs 15 lakh (Rs 1.5 million). The rate of interest varies from bank to bank -- while Indian bank charges 12 per cent a year, Syndicate Bank and Central Bank of India charge 11.5 per cent and OBC 11 per cent.
For loans up to Rs 4 lakh, no security deposit is required. For loan amounts between Rs 4 lakh and Rs 8 lakh, Central Bank of India require collateral (security such as share certificates, NSC, etc) equal to 50 per cent of the loan amount.
To avail of loans, banks insist upon two basic criteria: students must be Indian nationals and have documentary proof of their getting admission to the course they want to study.
Most banks insist on repayment of the loan amount in five to seven years after completion of the course, beginning six months after getting a job.
But, like Tripathi, borrowers can go in for flexible repayment schemes. He had to pay back his Rs 700,000 loan in five years which he extended to seven years. Initially his EMI was Rs 17,000 a month.
But now he is paying Rs 8,000 a month for the first two years, then up it to Rs 15,000 for the next four years and finally in the last (seventh) year, he'll pay Rs 23,000 a month.
With industry not borrowing, banks are flush with cash. They are only too eager to open their coffers to customers as consumer loans (such as housing, car finance and educational) are considered relatively risk free.However, the best option is to check out a few neighbourhood banks and bargain for the best deal.