What is a Skill Loan Scheme?

About Skill Loan Scheme:

• It was introduced in July, 2015, to offer institutional credit to individuals pursuing skill development courses aligned with National Occupations Standards and Qualification Packs. 
• These courses are conducted by training institutes following the National Skill Qualification Framework (NSQF) and lead to certifications, diplomas, or degrees.
• The Scheme applies to all member banks of the Indian Banks’ Association (IBA) and other banks and financial institutions as advised by the Reserve Bank of India (RBI). 
• Features:
  • Eligibility: Any Indian National who has secured admission in a course run by Industrial Training Institutes (ITIs), Polytechnics, or in a school recognised by Central or State Education Boards or in a college affiliated with a recognised university, training partners affiliated to National Skill Development Corporation (NSDC) Sector Skill Councils, State Skill Mission, or State Skill Corporation can avail loan for the purpose.
  • No specific restriction with regard to age.
  • Courses: Aligned with NSQF.
  • Duration of Course: No minimum duration.
  • Quantum of Finance: 5,000-1,50,000. Now, it has increased to Rs 7.5 lakh.
  • Moratorium: Duration of the course.
  • Repayment Period:
    • Loans up to Rs. 50,000: Up to 3 years.
    • Loans between Rs. 50,000 to Rs. 1 lakh: Up to 5 years.
    • Loans above Rs. 1 lakh: Up to 7 years.
  • Coverage: Course fees and expenses for assessment, examination, study material, etc.
  • Interest Rate: The interest rate to be charged by the bank should not be more than 1.5% p.a. over and above repo-linked-lending-rate (RLLR) or any other external benchmark interest rate conforming to RBI guidelines.
  • Collateral: The scheme does not allow for collateral to be charged from the beneficiary.
  • Ministry of Skill Development and Entrepreneurship (MSDE), through a November 2015 notification, brought into force the Credit Guarantee Fund for Skill Development (CGFSSD) for all skill loans sanctioned on or after 15 July 2015, to be administered by the National Credit Guarantee Trust Company (NCGTC).
  • Banks can apply to the NCGTC for a credit guarantee against defaults, and the NCGTC will provide this guarantee at a nominal fee which shall not exceed 0.5% of the amount outstanding.
  • The guarantee cover will be for a maximum of 75% of the outstanding loan amount (including interest, if any).