Context:
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.
Relevance:
GS III: Indian Economy
Dimensions of the Article:
- Skill Loan Scheme
- Credit Guarantee Fund
Skill Loan Scheme
Introduction:
- 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:
- 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).
Key Points:
- 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.
-Source: Business Standards
