| Scheme Name | Credit Guarantee Fund Scheme for Education Loan (CGFSEL) |
| Effective From | 16 September 2015 |
| Implementing Trustee | National Credit Guarantee Trustee Company (NCGTC) |
| Objective | To provide credit guarantee against default in eligible education loans |
| Eligible Borrower | New or existing borrower of Indian nationality meeting the eligibility criteria under the IBA Model Educational Loan Scheme for higher education in India and abroad |
| Co-Borrower | Parent(s)/guardian(s) will be co-borrower/joint borrower |
| Married Borrower | Joint borrower can be spouse or parent(s)/parents-in-law |
| Maximum Loan Amount under Guarantee | ₹7.50 lakh |
| Collateral Security | Not required up to ₹7.50 lakh under the scheme |
| Third-Party Guarantee | Not required up to ₹7.50 lakh under the scheme |
| Eligible Education Loan | Education loan sanctioned under the IBA Model Educational Loan Scheme |
| Eligible Study | Higher education in India and abroad |
| Eligible Lending Institutions | Public sector banks, private sector banks and foreign banks that are members of IBA; other institutions may be included in future |
| Interest Rate Ceiling | Interest rate should be maximum 2% p.a. over and above RLLR or another external benchmark conforming to RBI guidelines |
| Margin – Up to ₹4 lakh | Nil |
| Margin – Above ₹4 lakh – India | 5% |
| Margin – Above ₹4 lakh – Abroad | 15% |
| Guarantee Coverage | 75% of the amount in default |
| Amount in Default | Outstanding loan amount including accrued interest as on the date the account becomes NPA or the date of claim lodgement, whichever is lower, subject to Fund provisions |
| Annual Guarantee Fee (AGF) | 0.50% p.a. of the outstanding amount as on the date of application for guarantee cover |
| Who Pays Guarantee Fee | Bank bears the guarantee fee |
| Guarantee Fee Payment | Initial fee is payable upfront; subsequent AGFs are calculated on outstanding loan amount at the beginning of the financial year |
| Guarantee Fee Due Date | Subsequent annual fee is payable by the bank within 30 days, i.e. by 30 April |
| Non-Payment of AGF | Guarantee liability of the Fund may lapse for the credit facility against which the fee remains unpaid |
| Guarantee Period | From the date of payment of guarantee fee through the agreed tenure of the education loan |
| Loan Account Condition | At the material date, there should be no overdue and the loan should not have been classified as NPA |
| Borrower Activity | Activity for which the credit facility was granted should not have ceased |
| Claim Lock-in Period | 12 months from either the end of the interest moratorium or commencement of guarantee cover, whichever is later |
| Education Loan Moratorium | Course period + 1 year |
| Interest During Moratorium | Servicing of interest during study period and moratorium till commencement of repayment is optional for students |
| When Bank Can Invoke Guarantee | Within a maximum of 1 year from the date of NPA if the NPA occurs after the lock-in period, or within one year of the lock-in period if NPA occurs during the lock-in period |
| Conditions for Claim | Guarantee must be in force; lock-in period must have elapsed; dues must be unpaid and classified as NPA; and recovery proceedings must have been initiated |
| Initial Claim Payment | NCGTC pays 75% of the guaranteed amount within 30 days, subject to the claim being complete and in order |
| Remaining Claim | Balance 25% is paid after the bank certifies that all avenues of recovery have been exhausted |
| Recovery Responsibility | Even after guarantee payment, the bank remains responsible for recovering the entire outstanding amount from the borrower |
| Recovery of Assets | Amount realised from sale/takeover of borrower assets must first be credited to NCGTC before claiming the remaining guaranteed amount |
| Bank’s Recovery Duty | Bank must exercise the same diligence in recovery as it would have exercised without the guarantee |
| Guarantee Claim Through Branch | Claims received directly from branches/offices other than the Retail Asset Division, HO will not be entertained |
| Subrogation | NCGTC does not exercise subrogation rights; responsibility for dues remains with the bank |
| Ineligible Loan – Insurance/Guarantee | Loan where risk is additionally covered by Government, insurer or another guarantor/indemnifier is not eligible to the extent covered |
| Ineligible Loan – Legal Compliance | Loan not conforming to applicable law, Central Government directions or RBI instructions is not eligible |
| Ineligible Loan – Interest Rate | Loan sanctioned at more than 2% over Base Rate/MCLR where Base Rate/MCLR is applicable is not eligible |
| Bank’s Main Responsibility | Evaluate and sanction loans according to the IBA Model Educational Loan Scheme and maintain normal banking prudence and due diligence |
| Aadhaar Linkage | Bank is required to ensure linkage of every education loan with Aadhaar number |
| Credit Bureau | Borrower/co-borrower details must be registered with an appropriate credit information bureau |
| Monitoring | Bank must closely monitor the loan account and follow up for repayment |
| Compromise/OTS | Bank should intimate NCGTC while entering into any compromise or one-time settlement |
| Default Publication | Bank should secure the right for NCGTC/its agency to publish details of defaulting borrowers |
| Guarantee Fee Refund | Generally non-refundable, except cases such as excess remittance, duplicate remittance or fee not being due |
| Guarantee Fee Shortfall | Shortfall is payable by the bank along with interest at 4% above Bank Rate |
| Post-Claim Recovery | Recoveries after guarantee payment are deposited with NCGTC after adjustment of legal recovery costs |
| Post-Claim Loss Sharing | Balance recovery/loss is appropriated between NCGTC and bank in the ratio of 75:25 |
| Transfer/Assignment | Guarantee may terminate if the education-loan liability is transferred/assigned and eligibility conditions are not satisfied after transfer |
| Borrower Becomes Ineligible | NCGTC liability is limited to the borrower’s liability as on the date the borrower becomes ineligible, subject to scheme limits |
| Inspection Rights | NCGTC can inspect or call for bank and borrower records relating to guaranteed education loans |
| KYC for De-duplication | From January 2017, at least one of PAN Card, Voter ID, Aadhaar Number or Driving Licence is mandatory for successful de-duplication |
| Important Benefit | Education loans up to ₹7.50 lakh can be covered without collateral security and third-party guarantee, subject to CGFSEL conditions |
| Guarantee Coverage – Exam Point | 75% of amount in default |
| Guarantee Fee – Exam Point | 0.50% p.a. |
| Maximum Loan – Exam Point | ₹7.50 lakh |
| Scheme Trustee – Exam Point | NCGTC |
| Scheme Commencement – Exam Point | 16 September 2015 |
| Moratorium – Exam Point | Course period + 1 year |
| Contact | Nodal Officer – 011-28044429 |
