Education is the key to unlocking a brighter future, and the Reserve Bank of India (RBI) recognizes the importance of making quality education accessible to all. In recent years, the cost of education has been steadily increasing, making it challenging for many students and their families to afford higher education.

According to the All India Survey on Higher Education (AISHE) 2020-21, the Gross Enrolment Ratio (GER) for higher education in India stood at 27.1%. This indicates that there is a significant gap between the number of students seeking higher education and the resources available to them.

To bridge this gap, the RBI has established comprehensive guidelines for education loans, ensuring that deserving students can pursue their academic aspirations without financial constraints. These guidelines aim to encourage banks and financial institutions to provide education loans without imposing undue restrictions.

Each institute has its own selection criteria for admittance via this entrance test. Each IIM or participating institute has its own set of rules for admitting admission via CAT. The CAT is hosted by one of the IIMs, and in 2023, IIM Bangalore will be the host. The CAT 2023 announcement will be issued on August 2, 2023. The Common entrance Test (CAT) is regarded the most prominent entrance test in India for PGP/PGDM/MBA and equivalent management programmes given by IIMs and non-IIMs universities. In India, there are 20 IIMs that provide various management degrees for admission.

Latest RBI Guidelines for Education Loan

The Reserve Bank of India (RBI) regularly updates its guidelines to streamline the process of obtaining education loans and make them more accessible to deserving students. These guidelines aim to encourage banks and financial institutions to provide education loans without imposing undue restrictions. Let’s explore the latest RBI guidelines that facilitate the seamless availability of education loans:

Simplified Application Process: The RBI has directed banks and financial institutions to simplify the application and approval process for education loans. This includes providing clear and transparent information about terms and conditions, eligibility criteria, and documentation requirements.

Interest Rate Regulation: Banks must charge an interest rate based on the Marginal Cost of Funds-based Lending Rate (MCLR) that was 7.75 in September 2022 or the Repo Linked Lending Rate (RLLR). This ensures that students are not burdened with exorbitant interest rates, making education loans more affordable.

Flexibility in Repayment: The guidelines emphasize the importance of flexible repayment options. Banks are required to provide moratorium periods (course duration plus 6 months to 1 year), allowing students a grace period after completing their education before they start loan repayments. This provision acknowledges the time students may need to secure employment and stabilize their financial situation.

Transparent Loan Repayment Schedule: Banks are directed to provide students with a loan repayment schedule at the time of availing the loan. This schedule should clearly indicate the installment amounts, due dates, and the total amount to be repaid over the loan tenure. This enables borrowers to plan their finances effectively. The repayment tenure of education loans has been extended from 5-7 years to 10-15 years in the latest RBI guidelines, depending on the loan amount and the borrower’s profile.

Embracing Technology: The RBI encourages banks to leverage technology and offer online platforms for education loan applications. This digital transformation simplifies the application process and reduces the time taken for loan approvals, ensuring a hassle-free experience for students.