Beruflich Dokumente
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1.1
INTRODUCTION:-
1.2
HISTORY:-
Banking begins with the first prototype banks of merchants of the ancient
world, which made grain loans to farmers and traders who carried goods
between cities. This began around 2000 BC in Assyria and Babylonia. Later,
in ancient Greece and during the Roman Empire, lenders based in temples made
loans and added two important innovations: they accepted deposits and changed
money. Archaeology from this period in ancient China and India also shows
evidence of money lending activity.
The
origins
of modern
banking
can
be
traced
to
medieval
and
early Renaissance Italy, to the rich cities in the north like Florence,
Lucca, Siena, Venice and Genoa.
dominated
which
led
to
the
development
of
modern
banking
practices; promissory notes (which evolved into banknotes) were issued for
money deposited as a loan to the goldsmith. The goldsmith paid interest on
these deposits. Since the promissory notes were payable on demand, and the
advances (loans) to the goldsmith's customers were repayable over a longer time
period, this was an early form of fractional reserve banking. The promissory
notes developed into an assignable instrument which could circulate as a safe
and convenient form of money backed by the goldsmith's promise to
pay, allowing goldsmiths to advance loans with little risk of default. Thus, the
goldsmiths of London became the forerunners of banking by creating new
money based on credit.
The Bank of England was the first to begin the permanent issue of banknotes, in
1695. The Royal Bank of Scotland established the first overdraft facility in
1728. By the beginning of the 19th century a bankers' clearing house was
established in London to allow multiple banks to clear transactions.
The Rothschilds pioneered international finance on a large scale, financing the
purchase of the Suez Canal for the British government.
1.3
BANKING ACTIVITIES:-
a) Standard activities:Banks provide different payment services, and a bank account is considered
indispensable by most businesses and individuals. Non-banks that provide
payment services such as remittance companies are normally not considered as
an adequate substitute for a bank account.
Banks borrow money by accepting funds deposited on current accounts, by
accepting
term
deposits,
and
by
issuing
debt
securities
such
and 2007, there was an increase in the money supply, largely caused by much
more bank lending, which served to push up property prices and increase
private debt. The amount of money in the economy as measured by M4 in the
UK went from 750 billion to 1700 billion between 1997 and 2007, much of
the increase caused by bank lending. If all the banks increase their lending
together, then they can expect new deposits to return to them and the amount of
money in the economy will increase. Excessive or risky lending can cause
borrowers to default, the banks then become more cautious, so there is less
lending and therefore less money so that the economy can go from boom to bust
as happened in the UK and many other Western economies after 2007.
b) Range of activities
Activities undertaken by banks include personal banking, corporate
banking, , trading,
commodity, trading
in
equities, futures
and
options
c) Channels
Banks offer many different channels to access their banking and other services:
Call centre
Mail: most banks accept cheque deposits via mail and use mail to
communicate to their customers, e.g. by sending out statements
DSA is a Direct Selling Agent, who works for the bank based on a contract.
Its main job is to increase the customer base for the bank
1.4
a) Economic functions:
1. Issue of money, in the form of banknotes and current accounts subject
to check or payment at the customer's order. These claims on banks can
act as money because they are negotiable or repayable on demand, and
hence valued at par. They are effectively transferable by mere delivery,
in the case of banknotes, or by drawing a check that the payee may bank
or cash.
2. Netting and settlement of payments banks act as both collection and
paying agents for customers, participating in interbank clearing and
settlement systems to collect, present, be presented with, and pay
payment instruments. This enables banks to economize on reserves held
for settlement of payments, since inward and outward payments offset
each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
b) Bank crisis
Banks are susceptible to many forms of risk which have triggered
occasional systemic crises. These include liquidity risk (where many
depositors may request withdrawals in excess of available funds), credit
risk (the chance that those who owe money to the bank will not repay it),
and interest rate risk (the possibility that the bank will become unprofitable,
if rising interest rates force it to pay relatively more on its deposits than it
receives on its loans).
Banking crises have developed many times throughout history, when one or
more risks have emerged for a banking sector as a whole. Prominent examples
include the bank
U.S. Savings
and
crisis in
the
the Great
1980s
and
Depression, the
early
1990s,
the Japanese banking crisis during the 1990s, and the sub-prime mortgage
crisis in the 2000s
1.5
Assets of the largest 1,000 banks in the world grew by 6.8% in the 2008/2009
financial year to a record US$96.4 trillion while profits declined by 85% to
US$115 billion. Growth in assets in adverse market conditions was largely a
result of recapitalization. EU banks held the largest share of the total, 56% in
2008/2009, down from 61% in the previous year. Asian banks' share increased
from 12% to 14% during the year, while the share of US banks increased from
11% to 13%. Fee revenue generated by global investment banking totalled
US$66.3 billion in 2009, up 12% on the previous year.
The United States has the most banks in the world in terms of institutions (7,085
at the end of 2008) and possibly branches (82,000). This is an indicator of the
geography and regulatory structure of the USA, resulting in a large number of
small to medium-sized institutions in its banking system. As of Nov 2009,
China's top 4 banks have in excess of 67,000 branches with an additional 140
smaller banks with an undetermined number of branches.
CHAPTER NO. 2:
INDIAN PROSPECTIVE OF BANKING
INDUSTRY
2.1)
INTRODUCTION:-
Banking in India in the modern sense originated in the last decades of the 18th
century. Among the first banks were the Bank of Hindustan, which was
established in 1770 and liquidated in 1829-32; and the General Bank of India,
established 1786 but failed in 1791.
The largest bank, and the oldest still in existence, is the State Bank of India. It
originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as
the Bank of Bengal. This was one of the three banks funded by a presidency
government; the other two were the Bank of Bombay and the Bank of Madras.
The three banks were merged in 1921 to form the Imperial Bank of India, which
upon India's independence, became the State Bank of India in 1955. For many
years the presidency banks had acted as quasi-central banks, as did their
successors, until the Reserve Bank of India was established in 1935, under
the Reserve Bank of India Act, 1934.
In 1960, the State Banks of India was given control of eight state-associated
banks under the State Bank of India (Subsidiary Banks) Act, 1959. These are
now called its associate banks. In 1969 the Indian government nationalised 14
major private banks. In 1980, 6 more private banks were nationalized. These
nationalized banks are the majority of lenders in the Indian economy. They
dominate the banking sector because of their large size and widespread
networks.
The Indian banking sector is broadly classified into scheduled banks and nonscheduled banks. The scheduled banks are those which are included under the
2nd Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are
further classified into: nationalised banks; State Bank of India and its
associates; Regional Rural Banks (RRBs); foreign banks; and other Indian
10
private sector banks. The term commercial banks refer to both scheduled and
non-scheduled commercial banks which are regulated under the Banking
Regulation Act, 1949.
Generally banking in India was fairly mature in terms of supply, product range
and reach-even though reach in rural India and to the poor still remains a
challenge. The government has developed initiatives to address this through the
State Bank of India expanding its branch network and through the National
Bank for Agriculture and Rural Development with things like microfinance.
11
2.2)
HISTORY:-
a)
Ancient India:-
The Vedas (2000-1400 BCE) are earliest Indian texts to mention the concept
of usury. The word kusidin is translated as usurer. The Sutras (700-100 BCE)
and the Jatakas (600-400 BCE) also mention. Also, during this period, texts
began to condemn usury. Vasishtha forbade Brahmin and Kshatriya varnas from
participating in usury. By 2nd century CE, usury seems to have become more
acceptable. The Manusmriti considers usury an acceptable means of acquiring
wealth or leading a livelihood. It also considers money lending above a certain
rate, different ceiling rates for different caste, and a grave sin.
The Jatakas also mention the existence of loan deeds. These were
called rnapatra or rnapanna. The Dharmashastras also supported the use of loan
deeds. Kautilya has also mentioned the usage of loan deeds. Loans deeds were
also called rnalekhaya.
Later
during
the Mauryan
period (321-185
BCE),
an
instrument
called adesha was in use, which was an order on a banker directing him to pay
the sum on the note to a third person, which corresponds to the definition of a
modern bill of exchange.
b)
Colonial era
During the period of British rule merchants established the Union Bank
of Calcutta in 1869, first as a private joint stock association, then partnership. Its
proprietors were the owners of the earlier Commercial Bank and the Calcutta
Bank, who by mutual consent created Union Bank to replace these two banks.
In 1840 it established an agency at Singapore, and closed the one at Mirzapore
that it had opened in the previous year. Also in 1840 the Bank revealed that it
had been the subject of a fraud by the bank's accountant. Union Bank was
12
incorporated in 1845 but failed in 1848, having been insolvent for some time
and having used new money from depositors to pay its dividends.
The Allahabad Bank, established in 1865 and still functioning today, is the
oldest Joint Stock bank in India; it was not the first though. That honour belongs
to the Bank of Upper India, which was established in 1863, and which survived
until 1913, when it failed, with some of its assets and liabilities being
transferred to the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s.
Calcutta was the most active trading port in India, mainly due to the trade of
the British Empire, and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab
National Bank, established in Lahore in 1894, which has survived to the present
and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a
relative period of stability. Around five decades had elapsed since the Indian
rebellion, and the social, industrial and other infrastructure had improved.
Indians had established small banks, most of which served particular ethnic and
religious communities.
The presidency banks dominated banking in India but there were also some
exchange banks and a number of Indian joint stock banks. All these banks
operated in different segments of the economy. The exchange banks, mostly
owned by Europeans, concentrated on financing foreign trade. Indian joint stock
banks were generally undercapitalized and lacked the experience and maturity
to compete with the presidency and exchange banks. This segmentation let Lord
Curzon to observe, "In respect of banking it seems we are behind the times. We
13
are like some old fashioned sailing ship, divided by solid wooden bulkheads
into separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen
and political figures to found banks of and for the Indian community. A number
of banks established then have survived to the present such as Bank of
India, Corporation
Bank, Indian
Bank,
Bank
of
Baroda, Canara
c) Post-Independence:The partition
of
India in
1947
adversely
impacted
the
economies
14
The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two
banks could have common directors.
d) Current Period
All banks which are included in the Second Schedule to the Reserve Bank of
India Act, 1934 are Scheduled Banks. These banks comprise Scheduled
Commercial Banks and Scheduled Co-operative Banks. Scheduled Commercial
Banks in India are categorized into five different groups according to their
ownership and/or nature of operation. These bank groups are:
Nationalised Banks
Foreign Banks
Cooperative Banks
Scheduled Bank
15
inclusion launched
by
the Prime
Minister
of
2.3) ADOPTION OF BANKING TECHNOLOGY:The IT revolution has had a great impact on the Indian banking system. The use
of computers has led to the introduction of online banking in India. The use of
computers in the banking sector in India has increased many folds after the
economic liberalisation of 1991 as the country's banking sector has been
16
exposed to the world's market. Indian banks were finding it difficult to compete
with the international banks in terms of customer service, without the use of
information technology.
The RBI set up a number of committees to define and co-ordinate banking
technology. These have included:
17
subsidiaries and then by nationalised banks and foreign banks, while on-site is
highest for the nationalised banks of India.
banks and resulted in the reduction of the number of nationalised banks from 20
to 19. After this, until the 1990s, the nationalised banks grew at a pace of
around 4%, closer to the average growth rate of the Indian economy.
of
Commerce, UTI
Bank (since
renamed Axis
Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy
of India, revitalised the banking sector in India, which has seen rapid growth
with strong contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.
The next stage for the Indian banking has been set up with the proposed
relaxation in the norms for foreign direct investment, where all foreign investors
in banks may be given voting rights which could exceed the present cap of 10%
at present. It has gone up to 74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this
time, were used to the 464 method (borrow at 4%; lend at 6%; go home at 4)
of functioning.
19
CHAPTER NO. 3:
EDUCATION LOAN
20
3.1) Introduction:Education loans can augment the boundaries of what you can achieve.
Education never ends- it is not said without reason, we are educated all our lives
and getting an education not only is a great achievement but something that
gives you the tools to find your own way in the world. Education is an
important and necessary step, since this communicates knowledge and skills, so
each and every one can think for a stable and secure future. Here is no doubt
that education is the backbone of a civilized society, but now a days, education
has become more commercial and in an effort to ensure that best possible, for
the continuation of the training is an expensive affair. But there come some
questions about what about those who want to have a university degree, but do
not have the finances to spend for the degree? to assist pupils and parents like
this, lenders have the education and want to fulfil their dream or desire. These
education loans take care of all spending on education, on behalf of students and
too easily facilitate to the upcoming conditions. While working towards your
degree, you are constantly plagued about paying for the education fees, books,
and other living expenses. Education loan can provide funding for tuition fees,
board and rooms, books, computers and even student travel.
The education loans are easy to reach and are far in the credit market. Along
with growing awareness about the importance of education to succeed in the
knowledge economy, the cost of quality education too is growing fast.
Education loan are open to all people in its myriad form. Education loan can
realize your education plans of your children. Though most banks provide
education loan, it is the public sector banks that are in forefront in providing
education loans. There are many types of education loans. Discerning about
types of education loans will help you in making the accurate decision.
21
financial
preferences. You can either repay interest amount while still in school or after
graduation. The various sites on education loans can give you innumerable
repayment options and monetary remunerations.
For those students wishing to invest in an education that will led to a fulfilling
life and a rewarding career, educational loan can be a crucial decision. Student
loans, distance education loans, and even private education loans can help make
schooling affordable. In turn, affordable schooling can help students achieve
their very best and can lead to real success in late life.
22
3.2) OBJECTIVES:
The Educational Loan Scheme outlined below aims at providing financial
support from the banking system to deserving/ meritorious students for pursuing
higher education in India and abroad. The main emphasis is that every
meritorious student though poor is provided with an opportunity to pursue
education with the financial support from the banking system with affordable
terms and conditions. No deserving student is denied an opportunity to pursue
higher education for want of financial support.
In short, the scheme aims at providing financial assistance on reasonable terms:
To the poor and needy to undertake basic education.
To the meritorious students to pursue higher/ professional/
technical education.
education, private cost of education has gone up and as and when the fee
structure has revised, it will further go up. In a situation like this, many
aspirants for higher education will have denied access to higher education
unless educational loans come to their rescue. Apart from students, even
educational institutions whose finances are affected by reduced UGC and
Government grants need loan finance for infrastructure development and for
building assets from which regular returns can be obtained for financing their
activities in future.
3.4)
ADVANTAGES
&
DISADVANTAGES
OF
EDUCATION LOANS:
A. The following are the important benefits of education loan.
24
a) Most of the banks do not clear all the things at the time of giving loan and
makes many additional charges when you are repaying it. Some o the
undefined charges like processing charges, extra charges for delayed
payment, increase in overall cost of loan etc.
c) A borrower should choose long term for repaying the loan. Although for
it he will have to pay more interest. Because in some cases if a candidate
is not able to repay the loan on the scheduled date due to some problem
he has to suffer from many disappointing pressure from the bank.
Student Loan:The student loan is usually the best choice education loan for a student
whose parents cannot pay for his or her education. While the student
remains in school interest on this type of education loan accrues and is
paid for by the government. When the student stops attending school, the
education loan is usually paid off in payments. These payments can be
quite large of the loan is large, so students should borrow only what they
need.
A student loan is designed to help students pay for college tuition, books,
and living expenses. It differs from other types of loans in that the interest
25
ii.
Federal Perkins loans:A federal Perkins loan is a loan that you can use for college education,
either graduate undergraduate. It is a low interest rate low, usually having
an interest rate of around 5%. Perkins loans are available to students who
are considered as having exceptional financial needs when it comes to
finding their education.
iii.
Distance Education Loan:Distance education is more popular than ever today. It allows students to
study remotely, without having to attend classes at university. This allows
students from all walks of life to pursue a college education without
disrupting their family or work life. While there is no doubt that distance
education makes education more accessible to many, students often find
that they require distance education loan in order to pay for their remote
education.
iv.
Parent loan:These loans can apply by the parent for further higher and professional
education of their children. However, after getting their credit report will
apply for the loan, because which loans are provided by private lenders
such as banks and financial Institutions. But the rate of Interest is high,
and it can be reimbursed with in the period of 10 years.
v.
Special Education Grants:Special Education generally refers to students who are differently-able.
However, if it can also refer to students who require special education
needs in other ways. For example, students with emotional difficulty that
make a difficulty study may qualify for certain types of special education
26
grants and loans. Students who are notable to attend regular classes for a
specific reason may also apply for special education loans.
B. Documents required
1. A completed and signed application form
2. Two passport size photographs applicant
3. Photo id of the applicant. The applicant can submit one of the following:
a) Passport
b) Pan card
c) Voters ID card
d) Driving license
e) Employee ID (if working)
f) Defence ID card
g) Aadhaar Card
27
5. Admission documents:
6. Academic documents
a) Mark sheets and certificates of Class 10 and Class 12
b) Mark sheets and certificates of graduation (if the candidate is going
for post graduate studies)
c) Documents of scholarships (if the candidate obtained one)
d) Documents of any entrance exam take- GRE, GMAT, IELTS, TOEFL
28
8. Income proof of the guarantor if the applicant is not employed. The same
documents mentioned above is required for guarantor also
9. Declaration/ affidavit confirming that the candidate has not obtained any
other loan from other bank.
29
C.
31
3.7)
QUANTUM OF FINANCE
Need based finance subject to repaying capacity of the parents/ students with
margin and the following ceilings.
Studies in India - Maximum Rs.7.50 lacs.
Studies abroad - Maximum Rs.15 lacs
How much education loan should you take?
This question may haunt you if you dont do cost benefit analysis. The
maximum loan that lenders disburse for studies in India is Rs. 10 lakhs and for
overseas, Rs. 20 lakhs. Credila (HDFC) provides loan above Rs 20 lakhs. The
education loan you should take would depend on the course fees and your
capacity of generating down payment (payment from own pocket) towards it.
For a loan above Rs. 4 lakhs, one has to generate minimum down-payment of
5% for studies in India and 15% for studies abroad. For a loan below Rs. 4
lakhs, one can get the entire fees as loan, as the banks claim. But you can pay
the down payment or the margin money piecemeal. Allahabad Bank, for
instance, takes the margin money on year-to-year basis and disbursements are
made on a pro-rata basis. Though a student may be eligible for uppermost loan
limit he should exercise prudence while filling the loan amount. If the course for
which the loan is being taken enables better earnings then it may more than
justify the loan
32
3.8) MARGIN:
Up to Rs.2 lacs
Nil
15%
India
Studies Abroad
25%
3.9)
ELIGIBILITY CRITERIA:
I.
Courses eligible
A. Studies in India:
a) School education including 2 plus stages.
b) Graduation courses: BA, B.Com. B.Sc., etc.
c) Post Graduation courses: Masters and PhDs
d) Professional courses : Engineering, Medical, Agriculture, Veterinary,
Law, Dental,
e) Management, Computer etc.
f) Computer certificate courses of reputed institutes accredited to Dept. of
Electronics or institutes affiliated to university.
g) Courses like ICWA, CA, CFA etc
h) Courses conducted by IIM, IIT, IISc, XLRI. NIFT, etc.
i) Courses offered in India by reputed foreign universities.
j) Evening courses of approved institutes.
33
II.
Student eligibility:
34
3.10) INTEREST RATE ON EDUCATION LOAN:The mathematical formula for calculating EMIs is:
EMI=[P*R*(1+R)^N]/[(1+R)^N-1], where P stands for the loan
amount or principal, R is the interest rate per month(if the interest rate per
annum is 11% , then the rate of interest will be 11/(12*100)], and N is the
number of monthly instalments.
Loan
Morato
Loan
Interest
Loan
Amount
rium
Repayme
Rate
amount
Period
nt Period
after
Salar
salary
hand
moratori
for
after
um
servici
paying
period
ng debt
EMI
50000
11%
657,500
EMI Gros
Net
50% of Amount
11,0
25,0
22,00
11,085.
10914.1
85.8
00
89
RATE OF INTEREST:
Up to Rs.2 lacs
PLR
PLR + 1%
in
Processing fees
No processing fees/ upfront charges
Deposit of Rs. 5000/- for education loan for studies abroad which will be
adjusted in the margin money.
3.13) DISBURSEMENT
Education loan is to be disbursed n the form of term loan. A limit upto
which advance is to be allowed during each year will be set up. Each time
the borrowing scholar is in need of funds to pursue his studies; he will
approach the lending office and explain his needs to the Incumbents In
charge and will permit drawing on the borrowers account within the limit
fixed. This will also enable the Incumbent In charge to remain in close
touch with the borrowing students activities.
The loan to be disbursed in stages as per the requirement/demand
directly to the Institutions/ Vendors of books/ equipments /instruments to
the extent possible.
38
39
Loan can be availed from the branch nearest to the place of permanent
residence of the parent / guardian. Obtention of UID number (Aadhaar) of
the student is compulsory
Repayment of education loan is generally in the form of EMI. Student
should compare their EMI with likely salary. They can determine their
EMI amount for different combinations of interest rates and tenure.
According to experts, its desirable that the EMI should not exceed 50
percent of ones likely salary. It may happen that students are not able to
repay loans if salary is less than expected. In such cases students may
request banks to reschedule their loans.
In some careers, it is observed that salary levels initially are low.
Telescoping of repayment with stepped up instalments with the passage
of time is considered in such cases by banks on request. No prepayment
charges are generally levied by public sector banks in case of early
settlement of loan. The new scheme has extended the loan tenure which is
likely to facilitate lower EMI repayment.
b) Repayment Strategy:
Repayment starts after a 'moratorium period' or 'repayment holiday', that
is, one year after the end of studies or six months after getting a job,
whichever is earlier. The borrower must have a repayment strategy in
place before EMIs start.
However, if you pay simple interest on the principal during the study
period, your EMIs will be reduced to a large extent. A repayment
moratorium (also called a repayment holiday) is the course work period +
1 year or 6 months after the student gets a job or starts earning, whichever
is earlier. Many banks also give a 1 per cent interest concession to those
who repay the interest debited during the moratorium period.
3.16) TAX BENEFITS:If education loan is taken and are repaying the same, we can always claim
deduction under Section 80E of the Income Tax Act for the repayment of
interest on education loan. However, this deduction is only available to
individual or HUF.
Only an individual can claim deduction under Section 80E for the
repayment of interest on education loan provided that the loan was taken
for the Higher Education of Self or Spouse or Children or Student of
whom the individual is the legal guardian. The salient features of
claiming deduction under Section 80E are mentioned below:-
i.
Amount and the Nature or deduction:The deduction allowed under Section 80E of Chapter V1-A is only for the
repayment of interest on education loan and not for the purpose of
repayment of principal amount of education loan. At the time of availing
he education loan, the Banks issue a statement stating how much amount
is to be paid per annum for principal repayment and how much is o be
paid for interest on education loan.
There would be no treatment of repayment of principal for the purpose of
Income Tax and only the amount repaid as interest on education loan is
allowed to be claimed as a deduction while filling the Income Tax Return
41
This deduction under Section 80E is over and above the Rs.150000
deduction allowed under Section 80C and there is no minimum limit for
claiming this deduction under Section 80E
ii.
Purpose of Education Loan:This deduction under Section 80E is allowed only if the education loan
was taken for the purpose of Higher Education of Self or Spouse or
Children or the Student of whom the individual is the Legal Guardian.
This deduction is not only allowed for courses pursued in India but also
allowed for courses pursued outside India as well.
iii.
Loan from Organisation allowed for claiming deduction:Deduction under Section 80E allowed only f the Education Loan is taken
from any Financial Institution or approved Charitable Institution.
Education loans taken from relatives or friends do not qualify for
deduction under this Section and only loans taken from any FI or
approved Charitable Institution is allowed to be claimed as deduction
under this section.
iv.
Period of Deduction:This deduction under Section 80E is allowed to be claimed in the year in
which the individual starts paying the interest on education loan and is 7
succeeding years. Thus, this deduction is available for maximum period
of 8 years or until the interest is repaid by the individual in full
(whichever is earlier).
Subsidy under this Scheme shall not be available for those students once
they discontinue the course midstream, or who are expelled from the
Institutions on disciplinary or academic grounds. However, the interest
subsidy will be available only if the discontinuation was due to medical
grounds for which necessary documentation to the satisfaction of the
Head of educational institution will have to be given.
I.
After a payment reaches 90 days past due the delinquent status will
be reported to the three major credit bureaus and a mark negative mark will
be added to your credit report.
After 270 days past due, a student loan is considered to be in default. At this
point, your debt will be put into collections and payment will be required
from collections agencies.
II.
a) Loss of eligibility for forgiveness plan:If you have federal student loans in default, youll lose protections such
as federal forgiveness programs, forbearance, deferment, and access to
different repayment plan options
b) Lowered interest score (and resulting consequences):The default will be noted in your credit report and will continue to be
visible to lenders even if the default is quickly resolved. Keep in mind
this hit on credit can impact your eligibility for loans, increase your
mortgage rates, and even impact your future employment opportunities.
b) Collections fees:Once your student loans are turned over to collections, youll be
responsible for any associated collections fees. These will be tacked on to
your initial balance of principal and interest.
c) Tax Refund Offset:Should you fail to pay on your defaulted loans, you may have your tax
refund applied to your student loan payment. This is an automatic process
and one that can be particularly difficult should you rely on your refund
44
45
Details of assets and liabilities of person in case the loan amount is above
Rs. 4 lakhs:
Particulars of guarantors and details of their Assets and Liabilities.
If immovable property offered as collateral security- copy of Title
Deed, Valuation Certificate and Non-encumbrance Certificate
approved from layer of the bank.
Photocopy of Passport & Visa, in case of study abroad.
Any other document/ information depending upon the case and purpose
of the loan.
3.20) OTHER THINGS ABOUT EDUCATION LOAN:a) Academic progress:Monitoring academic progress of student is necessary for banks to ensure
asset quality of loans though subsequent instalments cant be stopped for
the mere reason that the student has failed in one or two subjects provided
he has been allowed to keep terms. Some foreign universities require
students to submit a certificate from their bankers about the sponsors
solvency/ financial capability. Students can approach banks to issue such
a capability certificate. But one needs to be careful so as to maintain a
certain level of academic progress throughout the course of study.
46
c) Multiple Loans:In case of receipt of application for more than one loan for student
borrower from a family, the family as a unit has to be taken into account
for considering the loan and security taken in relaxation to the total
quantum of finance disbursed, subject to margin and repaying capacity of
the parent/student.
d) Pay as you earn:It will be nice if your bank gives you the option of income-linked
repayment. Some education loan programmes in the US offer an income
sensitive repayment model where EMIs increase (or decrease) with
income. At present, the Indian Banking Association's model education
scheme has no provision for this. Banks also do not offer this option,
mainly due to lack of data and technology.
e) Take care of rate fluctuations:The interest rate is typically the base rate plus a fixed spread; say 1-2 per
cent that varies from bank to bank. So, it is a floating rate loan.
If you are earning enough and are able to save some money after paying
the current EMI and other expenses, use the spare money to create a
buffer in case of any increase in interest rate. "A sufficient surplus
47
48
g) Top Up Loan:Second loan (Top Up) Loan within the overall limit is now permitted to
pursue a professional course in India or abroad provided the projected
income of the student, after placement, is sufficient to cover full loan
repayment, and subject to the second loan being allowed with the security
requirements as applicable to the aggregate loan limit. Since the student
will not be able to take up a job after completion of the first course, his
obligation to repay the loan after one year of completion of the first
course would also need to be deferred. In such cases, the moratorium
period may be extended for the duration of the second course and the
combined repayment shifted to one year after the completion of the
second course, or 6 months after taking up a job whichever is earlier.
married
person,
co-obligator
can
be spouse or the
parent(s)/parents-in-law.
No Due Certificate: No due certificate need not be insisted upon as a pre condition for
considering educational loan. However, banks may obtain a
declaration/ an affidavit confirming that no loans are availed from
any other banks.
Disposal Application:Loan application have to be disposed of within a period of 15 days
to 1 month, but not exceeding the time norms stipulated for
disposing of loan applications under priority sector lending.
49
i) Minimum Age:There is no specific restriction with regard to the age of the student to be
eligible for education loan.
50
CHAPTER NO. 4:
CASE STUDY
51
of
Baroda
is
an
and financial
4.2) HISTORY:19081959
In 1908, Maharaja Sayajirao Gaekwad III, one of the knights of the Maratha
Kingdom, set up the Bank of Baroda (BoB), with other stalwarts of industry
such as Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey, Tulsidas
52
Kilachand and NM Chokshi. Two years later, BoB established its first branch
in Ahmadabad. The bank grew domestically until after World War II. Then in
1953 it crossed the Indian Ocean to serve the communities of Indians in
Kenya and Indians in Uganda by establishing a branch each in Mombasa and
Kampala. The next year it opened a second branch in Kenya, in Nairobi, and in
1956 it opened a branch in Tanzania at Dar-es-Salaam. Then in 1957 BoB took
a giant step abroad by establishing a branch in London. London was the center
of the British Commonwealth and the most important international banking
center. In 1958 BoB acquired Hind Bank (Calcutta; est. 1943), which became
BoB's first domestic acquisition.
1960s
In 1961, BoB merged in New Citizen Bank of India. This merger helped it
increase its branch network in Maharashtra. BoB also opened a branch in Fiji.
The next year it opened a branch in Mauritius. Bank of Baroda In 1963, BoB
acquired Surat Banking Corporation in Surat, Gujarat. The next year BoB
acquired two banks: Umbergaon Peoples Bank in southern Gujarat and Tamil
Nadu Central Bank in Tamil Nadu state.
In 1969 the Indian government nationalised 14 top banks, including BoB. BoB
incorporated its operations in Uganda as a 51% subsidiary, with the government
owning the rest.
In 2002 BoB acquired Benares State Bank (BSB) at the Reserve Bank of Indias
request. BSB was established in 1946 but traced its origins back to 1871 and its
function as the treasury office of the Benares state. In 1964, BSB had acquired
Bareilly Bank (est. 1934), with seven branches in western districts of Uttar
Pradesh; BSB also had taken over Lucknow Bank in 1968. The acquisition of
BSB brought BoB 105 new branches. Lucknow Bank, a unit bank with its only
office in Aminabad, had been established in 1913. Also in 2002, BoB
53
listed Bank of Baroda (Uganda) on the Uganda Securities Exchange (USE). The
next year BoB opened an OBU in Mumbai.
In 2004 BoB acquired the failed Gujarat Local Area Bank. BoB also returned to
Tanzania by establishing a subsidiary in Dar-es-Salaam. BoB also opened a
representative office each in Kuala Lumpur, Malaysia, and Guangdong, China.
2010s
In 2010, Malaysia awarded a commercial banking licence to a locally
incorporated bank to be jointly owned by Bank of Baroda, Indian Overseas
Bank and Andhra Bank. That same year, BoB also opened a branch in New
Zealand.
In 2011, BoB opened an Electronic Banking Service Unit (EBSU) was opened
at Hamriya Free Zone, Sharjah (UAE). It also opened four new branches in
existing operations in Uganda, Kenya (2), and Guyana. BoB closed its
representative office in Malaysia in anticipation of the opening of its consortium
bank there. BoB received 'In Principle' approval for the upgrading of its
representative office in Australia to a branch.
The Malaysian consortium bank, India International Bank Malaysia (IIBM),
finally opened in Kuala Lumpur, which has a large population of Indians. BOB
owns 40%, Andhra Bank owns 25%, and IOB the remaining 35% of the share
capital. IIBM seeks to open five branches within its first year of operations in
Malaysia, and intends to grow to 15 branches within the next three years.
54
4.3) INTERNATIONAL PRESENCE:In its international expansion, the Bank of Baroda followed the Indian Diaspora,
especially that of Guajaratis. The Bank has 104 branches/offices in 24
countries including 61 branches/offices of the bank, 38 branches of its 8
subsidiaries and 1 representative office in Thailand. The Bank of Baroda has a
joint venture in Zambia with 16 branches.
Among the Bank of Barodas overseas branches are ones in the worlds major
financial centres (e.g., New York, London, Dubai, Hong Kong, Brussels and
Singapore), as well as a number in other countries. The bank is engaged in retail
banking via the branches of subsidiaries in Botswana, Guyana, Kenya,
Tanzania, and Uganda. The bank plans has recently upgraded its representative
office in Australia to a branch and set up a joint venture commercial bank in
Malaysia. It has a large presence in Mauritius with about nine branches spread
out in the country.
The Bank of Baroda has received permission or in-principle approval from host
country regulators to open new offices in Trinidad and Tobago and Ghana,
where it seeks to establish joint ventures or subsidiaries. The bank has
received Reserve Bank of India approval to open offices in the Maldives, and
New Zealand. It is seeking approval for operations in Bahrain, South Africa,
Kuwait, Mozambique, and Qatar, and is establishing offices in Canada, New
Zealand, Sri Lanka, Bahrain, Saudi Arabia, and Russia. It also has plans to
extend its existing operations in the United Kingdom, the United Arab Emirates,
and Botswana.
The tagline of Bank of Baroda is "India's International Bank".
55
a) Baroda Vidya:Bank of Baroda presents a one of its kind finance option for parents of students
pursuing school education. These loans are available for studies from Nursery to
Senior Secondary School.
No Margin.
No security required.
56
Eligibility:
The parents must be residing in the place for a minimum period of -3years, except in the case of transferable job.
Security:
Rate of Interest:
b) Baroda Gyan:A loan product specially designed for students pursuing Graduation, Post Graduation, Professional & Other courses in India. Bank of Baroda extends a
helping hand to energize your studies and promote education of the youth.
No processing charges.
58
Dental,
Management,
Computer,
Ayurved,
Homeopathy,
Evening
Courses
of
Institutes
approved
by
State
Central
Govt/UGC/AICTE/AIBMS/ICMR etc
Student Eligibility:
59
A meritorious student (who qualifies for a seat under merit quota) will
also be eligible for loan under this scheme even if the student chooses to
pursue a course under Management Quota.
Expenses covered:
Any other expenses required to complete the course - like study tours,
project works, thesis, etc.
60
Margin:
Upto 4 Lakhs
Nil
Above 4 lakhs
5%
Repayment Period:
Security:
Above Rs. 4.00 Lacs and up to Rs. 7.5 lacs: Collateral in the form of a
suitable third party guarantee along with assignment of future income.
Above Rs.7.5 lacs: Tangible collateral security equal to 100% of the loan
Amount along with assignment of future income.
Rate of interest:
For loans above 4 lacs, interest rate will be 2 % above base rate for ISB,
Hyderabad Students which is 2 % less than that for students of other
institutes
c) Baroda Scholar:
Bank of Baroda presents financial assistance to students going abroad for
Professional / Technical studies. The loan offering is designed to empower you
with the financial capability to realise your dreams... Achieve your goals...
Eligibility of courses:
Graduate/Post Graduate / Doctorate / Job Oriented Professional / Technical
Courses offered by reputed Universities overseas.
Regular Degree/ Diploma courses like Aeronautical, pilot training, shipping etc.
The Institute should be recognized by the competent local aviation / shipping
authority and Director General of Civil Aviation/shipping in India.
Student Eligibility:
62
Hostel/Mess charges.
Examination/Library/Laboratory fee.
Purchase of books/equipments/instruments.
Any other expense required to complete the course e.g. study tour, project
work, thesis etc.
Repayment Period:
63
Security:
Above Rs. 4.00 Lacs and up to Rs. 7.5 lacs: Collateral in the form of a
suitable third party guarantee along with assignment of future income.
Above Rs.7.5 lacs: Tangible collateral security equal to 100% of the loan
amount along with assignment of future income
Rate of Interest:
Rs.20000/
Rs.50000/
Rs.75000/
Rs.150000/
65
6. Following expenses shall be considered for granting the loan under this
scheme:
Tuition/fee/Course fee
Examination /Library/Laboratory fee
Caution Deposit
Cost of Books/Equipments and Instruments
Any other reasonable expenditure found necessary for completion
of the course.
There will not be stipulation of any margin under the product i.e. Margin will
be Nil
Rate of Interest shall be Base rate plus 2% i.e. 12.50% at present and simple
interest shall be charged till the start of repayment. Servicing of interest during
Study Period and Moratorium Period shall be at the option of the borrower. In
case, interest is serviced during the study period and Moratorium period,
Concession of 1% in interest rate for entire tenure of loan shall be provided.
For girl students, an incentive in the form of 1% Interest Concession shall be
provided as being provided under our Education Loan Product.
66
Upto 2 Years
3 to 7 Years
Insurance:
Group credit Life Insurance Cover will be available at the option and cost of the
borrower. Cost of Insurance Premium may be financed by Bank by adding the
same in the project cost and shall be recovered along with EMIs of the loan.
The Borrower can repay the loan any time after commencement of
repayment without having to pay any prepayment charges.
67
Interest rate:
Baroda Education Loan (w.e.f. 01.10.2013)
Loans upto Rs.4.00 lacs
Base Rate i.e. 9.90%+ 2.50%
Loans above Rs.4.00 lacs and upto Rs
7.50 lacs
Loans above Rs.7.50 lacs
Base Rate + 1.75%
Baroda Education Loan to students of For List-A Institutions:
Premier Institutions
Upto Rs.15.00 Lacs :
Base Rate + 0.25%
(No special concession for girl Above Rs.15.00 Lacs: Base Rate .
students under this scheme.)
For List B Institutions:
Upto Rs.7.50 Lacs: Base Rate + 0.75%
Above Rs.7.50 Lacs: Base Rate +
0.50%
Baroda Education Loan for Vocational Base Rate + 2.00%
Education & Training
No special concession for girl students under this scheme.
0.50% concession in ROI to Education Loans sanctioned for the benefit of girl
student.
68
Course fee (all inclusive) may exceed Rs. 10 lacs but subsidy amount will
be calculated only upto loan amount of Rs. 10 lacs.
Interest rates charged on the loan shall be as per interest rates applicable
under our Education Loan Scheme.
69
There would be tag / marker on the degree and mark sheet of the
student indicating his repayment liabilities. Electronic tag will enable
employers to identify loanees. Nodal Bank for the scheme shall be Canara
Bank and monitoring shall be finalized in consultation with the Canara
Bank.
Bank
Loans
Rs. 4 lakh
7.5 lakh
11.50% Base
Avanse DHFL
Rate
Spread
17.15% , for
Axis Bank
Girls
16.15%
lakh
+ Spread
70
16.75%
Bank of Baroda
12.75%
12.75%
13.20% , for
Bank of India
Girls
12.20%
12.00%
11.70%
Bank of Maharashtra
12.75%
12.25%
11.50%
Canara Bank
12.50%
13.50%
11.25%
12.00%
12.50%
12.50%
12.25% , for
Central Bank of India
Girls
11.75%
15.50% , for
City Union Bank
Girls
15.00%
11.75%
16.00%
Corporation Bank
11.85%
12.85%
12.35%
Dena Bank
11.80%
11.80%
11.80%
Federal Bank
13.45%
13.45%
13.45%
11.75% - 13.25%
11.75% - 13.25%
HDFC Credila
11.75%
13.25%
IDBI Bank
11.25%
11.25%
11.25%
Indian Bank
12.50%
12.50%
12.50%
13.50%
13.25%
13.50%
Karnataka Bank
Girls
13.00%
14.00%
for
-
13.50%
Girls-13.50% 13.50%
71
14.00%
OBC
12.75%
13.25%
12.00%
PNB
13.25%
14.25%
12.25%
SBI
13.35%
13.60%
11.60%
12.75%
12.75%
for
Girls- 11.75%
11.75%
Tamilnadu Mercantile
Bank
UCO Bank
14.25%
14.25%
13.75%
12.70%
12.70%
12.45%
12.25%
Union Bank of India
for
Girls
11.75%
Loan Amount
10,00,000
Tenure
10 years
Interest rate
11.65%
Processing fees
72
11.50%
Loan amount
Total interest due
Processing fees
Year
Principal
Interest
Total
Outstanding
Paid(A)
Paid(B)
Payment(A+B)
Loan Balance
2015
18009
38573
56582
981991
2016
53398
111350
169748
923594
2017
65574
104169
169743
858019
2018
73637
96110
169747
784383
2019
82688
87059
169747
701694
2020
92850
76892
169742
608842
2021
104267
65479
169746
504575
2022
117085
52665
169750
387491
2023
131477
38270
169747
256014
2024
147638
22108
169746
108376
2025
108374
4788
113162
73
75
76
5.1) Finding:I visited Bank of Baroda at Dombivli branch. The Credit Officer Dinesh Kumar
Singh has provided me with the relevant information regarding my project. So
from the visit made I came to know that Bank of Baroda has various types of
Education Loan i.e. Baroda Vidya, Baroda Gyan, Baroda Scholar and Baroda
Education Loan for Vocational Education & Training. Baroda Vidya is for
nursery to class 12th, Baroda Gyan is for graduation and Baroda Scholar is to
study abroad. The maximum amount of education loan to study in India is Rs.
10 lakhs and to study abroad Rs. 20 lakhs. Education Loan is mostly availed by
middle class people and high class people approach for loan if they want to
study abroad. 100% loan amount is disbursed in Baroda Vidya, 95% loan
amount is disbursed in Baroda Gyan and 85% loan amount is disbursed in
Baroda Scholar. Bank of Baroda offers 0.5% concession to girls for Education
Loan. The processing fees are nil. The repayment of the loan starts after the
completion of the course plus 6 months after getting the job. Tax benefit is
given to guardian at the time of payment of interest on loan but the student does
not get any tax benefit on the repayment of education loan. It covers all the
expenses of books, library, travelling expenses, etc. The amount is disbursed in
the name of college/institute/university. If the loan is taken upto 7.5 lakhs then
there is no need of collateral security, but if it is above 7.5 lakhs then 100%
securities as much as loan amount is required.
77
78
5.3) CONCLUSION:The banks provide good service for the society by providing educational loan
for the student who unable to continue their higher education due to lack of
cash. On the basis of above findings it is clearly observe that public banks have
more reach, variety and flexibility in their education loan schemes. Maximum
loan for studies in India ranging from Rs. 7.50 lakhs to 10 lakhs and for studies
in abroad is Rs. 15-20 lakhs by public banks. All banks have same repayment
facility i.e. one year after completion of course or 6 months after securing a job
whichever is earlier. Normally, processing fees on education loan is nil. The
customers should also take extra care before availing for any education loan
from any bank. And also should search for the better offer and analyze before
availing the loan.
79
WEBLIOGRAPHY
BIBLIOGRAPHY
ANNEXURE
BANK OF BARODA
1) Is there a need for co-applicant while applying for Education Loan?
Yes
No
No
No
No
No
11) What is the maximum loan amount disbursed to study in India and
abroad?
81
No
CUSTOMER
1) Have you ever availed for education loan?
Yes
No
Private bank
Difficult
Simple
Cant say
Floating
Adjustable rates
Others
5) Which criteria are considered by you while selecting the education loan?
Lower rate of interest
Easy availability
Quality of service
No
7) Are you satisfied with the bank from where you have availed the
education loan?
Yes
No
82
8) What do you think about the paper formalities of the education loan in
Bank of Baroda or any public bank?
Yes
No
9) Duration taken by the bank from where you availed education loan?
0-1 month
0-2 month
0-3 months
10) Do you think, duration taken by the bank in sanctioning loan is?
Very little
Justified
Long enough
Very long
11) Do you think, duration given by the bank for repayment of Education
Loan is?
Very little
Justified
Long enough
Very long
Good
Very good
Excellent
83
ABBREVIATIONS
FI:
Financial Institution
IBA:
HUF:
MBA:
ISB:
IIM:
IITs:
NITs:
IIFT:
AIIMS:
AFMC:
84
SPJIM:
XLRI:
MBI:
IISc:
UGC:
AICTE:
AIBMS:
ICMR:
NIFT:
CA:
Chartered Accountant
CS:
Company Secretary
CFA:
ICWA:
NSC:
BPLR:
MCA:
MS:
Master of Surgery
85
CIMA:
CPA:
86