Skill Loan Scheme: economy

The finance minister recently announced a revision to the model skill loan scheme, which will now facilitate loans up to Rs 7.5 lakh backed by a guarantee from a government-promoted fund.

 

What’s in the news?

  • Launch Date: July 2015
  • Purpose: To provide institutional credit to individuals pursuing skill development courses aligned with National Occupation Standards and Qualification Packs (NOS and QPs).
  • Target: Courses conducted by training institutes following the National Skill Qualification Framework (NSQF), leading to certifications, diplomas, or degrees.

Eligibility:

Who Can Apply: 

  • Any Indian national with admission in a recognized course at:
  • Industrial Training Institutes (ITIs)
  • Polytechnics
  • Schools recognized by Central or State Education Boards
  • Colleges affiliated with recognized universities
  • Training partners affiliated with the National Skill Development Corporation (NSDC), Sector Skill Councils, State Skill Missions, or State Skill Corporations.

Age Restriction: None

Features:

  • Courses: Must be aligned with NSQF.
  • Course Duration: No minimum duration.
  • Quantum of Finance: Initially Rs. 5,000 to Rs. 1,50,000, now increased to Rs. 7.5 lakh.
  • Moratorium Period: 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: Includes course fees, assessment, examination, study materials, etc.
  • Interest Rate: Should not exceed 1.5% per annum over the repo-linked lending rate (RLLR) or other external benchmark rates as per RBI guidelines.
  • Collateral: No collateral required from the beneficiary.

Credit Guarantee Fund:

  • Purpose: To facilitate access to credit for skill development and enhance employability.
  • Support: Backed by a credit guarantee scheme to reduce risk for lenders and increase access to loans for borrowers.

Credit Guarantee Fund for Skill Development (CGFSSD):

  • Implemented by the Ministry of Skill Development and Entrepreneurship (MSDE) through a notification in November 2015.
  • Administered by the National Credit Guarantee Trust Company (NCGTC).

Guarantee Coverage:

  • Banks can apply for a credit guarantee against defaults.
  • NCGTC provides this guarantee at a nominal fee (up to 0.5% of the outstanding amount).
  • Guarantee cover is up to 75% of the outstanding loan amount (including interest)