Educational finance corpus inching towards reality

Updated on: Saturday, June 19, 2010

A proposal to set up an initial corpus of Rs.5,500 crore to provide cheaper educational and institutional loans got strong backing from the states on Friday.

Human Resource Development (HRD) Minister Kapil Sibal said that all states have welcomed the proposal. He was talking to reporters after a meeting of the National Foundation for Teachers' Welfare attended by state education ministers.

"The formation of a National Education Finance Corporation (NEFC) is an ongoing process, it will be taken up with the finance ministry and the Planning Commission," Sibal said.

The proposed NEFC corpus will focus on re-financing banks to provide education and institutional loans at lower interest rates with longer loan repayment time. It will be started with an initial corpus of Rs.5,500 crore (Rs.55 billion) and the ministry will infuse Rs.3,000 crore (Rs.30 billion) every year to reach Rs.35,500 crore (Rs.350.5 billion) by 2020.

The state governments' contribution to the fund has, however, not been worked out.

"We have asked the state governments to contribute. Now they will take up the issue with their finance ministers," Sibal said.

Under the NEFC, education loans will be available at an interest rate as low as 4 percent for those with parental income less than Rs.4.5 lakh (Rs.450,000) per annum. For others, the rate will be 7 percent. Loans for those whose parental income is above Rs.12 lakh (Rs.1.2 million) will attract an interest rate of 9 percent.

The present interest rates for educational loans are between 10 and 12 percent. The repayment term will also be increased from the present 5 to 7 years to 6 to 12 years.

NEFC will also provide loans for building infrastructure and other facilities to private and government educational institutions.

Educational finance corpus inching towards reality

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