Why in News?

The Ministry of Skill Development and Entrepreneurship (MSDE) revamped the ‘model skill loan scheme’ for skill development courses, with a fresh maximum loan limit of ₹7.5 lakh.

The earlier (launched in 2015) Credit Guarantee Fund Scheme for Skill Development (CGFSSD) had a maximum loan limit of ₹1.5 lakh.

What’s in Today’s Article?

• Challenges Faced by the CGFSSD
• Need for a Revamped Model Skill Loan Scheme
• The Revamped Model Skill Loan Scheme

Challenges Faced by the CGFSSD:

• Low fund utilisation under the scheme: As on March 31, 2024, loans amounting to ₹115.75 crore had been extended to just 10,077 borrowers. This was mainly due to low ticket size of loans (upto ₹1.5 lakh).
• Inflation: As course costs and fees rose due to inflation, many of the high-cost courses were left out of the scheme.
• Less number of lending institutions: Only member lending institutes of the Indian Banking Association (IBA) were allowed to lend earlier, and there was low uptake by both private and public sector banks due to their limited reach.

Need for a Revamped Model Skill Loan Scheme:

• To fill the skill gap: Only 5% of the so-called skilled workforce is formally skilled and hence there is a huge skilling gap that needs to be filled.
• Adapting to rapid technological and societal shifts: As India (and the world) is undergoing rapid technological and societal shifts, India’s education systems and job market must adapt to keep pace and work hard towards a vision for 2047.
• To integrate new-age learning: As the 'Skill Economy' is increasingly market-led, new-age learning must be integrated into the skill development ecosystem.

The Revamped Model Skill Loan Scheme:

• Background: In her Budget 2024-25 speech, the Finance Minister had announced the model skill loan scheme.
• About the scheme:
  • The scheme is aimed at providing easy access to advanced-level skill courses, which potentially pose a significant financial barrier for many deserving students and candidates to gain futuristic and in-demand industry skills.
  • The scheme empowers youth with financial support for advanced skilling, through the instrument of collateral-free loans up to ₹7.5 lakh.
• How is it an upgrade over the earlier scheme?
  • The maximum ticket size of individual loans eligible for credit guarantee cover has been increased to ₹7.50 lakhs from the earlier limit of ₹1.50 lakhs.
  • Under the new scheme, the lending network has been broadened from only IBA banks to include Non-Banking Financial Companies (NBFCs) and small finance banks.
  • The revised scheme will now allow access to more skill courses, against only national skill qualification framework (NSQF)-aligned courses under the old scheme.
  • Also, non-NSQF courses that are on boarded on the Skill India Digital Hub platform will come under the scheme.
• Significance:
  • By ensuring uninterrupted credit flow in the skilling sector and by providing low-income youths with access to affordable finance for specialised skill courses, this scheme is expected to help 25,000 students every year
  • With the help of this initiative, aspiring candidates can choose from a plethora of skill courses in sectors such as healthcare, IT, AI-data science, cloud application, digital marketing, gaming, drone technology, etc.
  • These courses, driven by changing industry dynamics, offer substantial placement opportunities and potential for international mobility