New scheme to dispose of loans taken by students from banks for higher studies

Finance department constitutes committee

Bhopal, October 19, 2015 (Ataullah Faizan):  Reserve Bank of India and Indian Bank Association has directed to make available higher education loans to students as per prescribed model scheme. Earlier, there was no provision for insurance of loanee students’ life and accident under higher education loan scheme. Under the revised scheme, provision of life insurance will be made in the agreement only after consent of loanee. Finance Department has made it clear in its order that there is no bondage of life insurance for loanee students during current fiscal. In the state, cases have come to the fore that some loanee students have died untimely during the period of loan repayment after completing education. Due to it, burden of payment of loan has fallen on concerning family. Had such a family got student covered under life insurance, this burden would not have fallen on them. Finance Department has directed for giving life insurance cover to loanee students in proportion to their loan amounts. Several other provisions have also been made.

Now, it has been decided that loanee students will be connected with Pradhan Mantri Suraksha Bima Yojana and Pradhan Mantri Jeevan Jyoti Yojana. If a student dies untimely, then after receiving claims under the insurance schemes as on date of NPA, 50 percent of remaining amount will be paid by state government to banks as subsidy. Remaining 50 percent of loan will be waived off by bank. Under the scheme, it has been provisioned that efforts would be made for payment to banks within 60 days after case is brought to state government’s notice by bank.

This arrangement will be made only in the case where a student is not covered by life insurance. If bank has given life insurance cover against education loan to a student, then bank will settle loan with amount received as insurance claim. It is clearly mentioned in the provisions that this scheme will be applicable only in case of untimely death or permanent disability.

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