PROJECT ON Educational Loan Of Central Bank of India Under supervision of: Mr.

Vikrant Aggarwal

Submitted by: Prachi Chopra Bachelor of Business Administration (Banking and Insurance) 3rd Semester Enrollment No.0502061808 Trinity Institute of Professional Studies Sector 9 DWARKA, NEW DELHI Affiliated to Guru Gobind Singh Indraprasta

University ACKNOWLEDGEMENT Acknowledgement is an art, one can write glib stanzas without meaning a word, and on the other hand one can make simple expression of gratitude. Though the language is a poor substitute for sentiments, yet there is no way out to recover to it for expressing my profound gratitude, indebtedness and sincere regards to Mr. Vikrant aggarwal, Lecturer, Trinity Institute Of Professional Studies for being my Research guide. It was under his constant guidance that I have been able to complete my project and make it a great learning experience. CONTENTS 1. Scope, limitations and research methodology of study 2. Introduction to loans loans Types of loans 3. Introduction of educational loan 4. Introduction to central bank of India: History Recent news/initiatives 5Various loans offered by cbi 6. Comparison of educational loan rates of CBI, HSBC, ICICI 7. Concession given to aims by cbi 8.Cent Vidayarthi scheme of cbi 9.Conclusion and recommendations 10.Bibliography Title of the Study Loans are the most versatile form of lending. Thats why I take the title of the study of my project as Analysis of loans in India with special reference to CENTRAL BANK OF INDIA.

Scope of loans The scope of the loans is vast. It deals with that topic of income eligibility, Annual or monthly installments, late payment charges, interest rates. In this Study above points are taken to compare the loan of cbi bank with respect to Other issuers of loans. By this way of studying we can find out the image of the cbi educational loan with other financial institutions. Type of Research: This is basically an analytical study. The study aims at analyzing the impact of loans on the consumers. Source of data collection: In this study, both primary and secondary data have been used. The required secondary data is collected through direct newspapers and internet Primary data is collected by gaining information by the manager of central bank of India tilak nagar branch. Type of analysis of data: Classification and tabulation is carried out on the surveys collected. Inferences are drawn on the surveys. Charts and tables are presented to improve the presentation of the report. Some surveys collected from different newspaper are also represented in form of tables to improve efficiency and clarity of the study. Limitations of the study: The study faces many limitations like any other research. However, these Limitations cannot have a drastic impact on the conclusions and Recommendations of the study as these limitations are within manageable Limits. Some of the limitations are as follows: The coverage of more number of banks was not highly successful because of The time limit and the adequacy in collection of data. High degree of accuracy is doubtful as the findings are based on the premise That has given factual information. Hence, an allowance should be made for deviations and errors. Being a purely academic-based project, it has been limited to certain particular areas of study of educational loan.

Loan Definition An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan. Alo an is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. In a loan, the borrower initially receives orborr ows an amount of money, called thepr incipal, from the lender, and is obligated to pay back orr epay an equal amount of money to the lender at a later time. Typically, the money is paid back in regularinstallm ents, or partial repayments; in an annuity, each installment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Types of loans Secured Secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security a lien on the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car; in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter

Unsecured Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages: credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.

Demand
Demand loans are short term loans that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

Loan payment
The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value overtime. It varies with the type if loan

Education Loans
Educational loans work like any other debt. That is, loans are simply specific money that you borrow from a bank, a private lender, or some other type of lender. Afterwards, you must repay your debts with interest. However, unlike other types of loans, educational loans are different in several respects Getting best education loan Most students and parents today realize how expensive an education is. Whether you hope to study at a private high school, a college, university, or an overseas school, tuition

costs plus the costs of books and living can quickly add up. If you are worrying about the cost of school, you should not feel that money has to decide your education. There are a number of financial aid options that can help you. Educational loans can be one important part of your overall financial aid package. There are special distance education loans, need-based loans, college loans, government based loans, and private education loans -- in fact, chances are excellent that there are educational loans that can meet your specific needs. One should keep in mind these things before taking education loanThe lending sector has commendably recognized the hurdle for these students and has acted upon the issue to make higher education feasible by introducing the facility of easy loans for students. The most beneficial feature of the creation of these types of loans is that They are easy to acquire. Student usually have a very liberalized set of terms and conditions governing them, which hence makes them apt for the purpose for which they have been created - grant of loan assistance for education.
Scholarships were one of the traditional grants that were provided to students who had a greater strength to assimilate knowledge. The scholarships were of formal and informal nature in the earlier times, and it was also viable for rulers, governments, nobility and universities to nurture the process of learning within the intelligence of the selected few, by the provision of scholarships. The advancement, expansion and spurt of science, commerce and arts after the Renaissance has made the sphere of learning and education so extensive that it is beyond the reach of the government to provide fiscal assistance to all scholars who wish to embark upon a voyage of scholastic learning. The fast, easy student loans have thus increased the probability of more and more students undertaking higher education. The credit reach of lenders who are willing to induct new loan schemes into their already existing segments have started taking up new student loans based in the seed of time. To name a few we may state loans such as, 'Easy Private Student Loans' or 'Quick and Easy Student Loans' or 'Easy Student Loans with Bad Credit'. Some of the outstanding and notable features of the student loans that are easy to get, have been observed in the following paragraph. In a quick sweep it can be said that as these loans are student loans, easy approval is the most evident feature. The approval of this type of loan basically depends upon the meritorious records of the applicant. The other two factors that play a deciding role are the credit history of the student and the fiscal consideration that has to be paid for the

higher education. The current credit rating and scores are not deeply assessed, which makes the process faster and hassle free. The second merit of these types of loans is the regulation that is implemented by the government regarding the provision of easy loans for students. The governments, recognizing the indigenous capabilities, prohibit the lenders from levying heavy rates of interests Upon the use of the easy loans for students. The Ministries of Education also maintain a strict check on the approval process of these loans which makes student loans easy to get The third merit is the privilege of installments of the easy loans for students. The installments of these loans start after the student successfully completes his/her education. The total amount of the loans is repaid over a reasonably spanned time period and a minimal rate of interest is levied. 1. Interest rates the first and the foremost is the interest rates charged on the education loan. This interest rate is the primary factor that earns money for banks and so they want it to be higher, but the competition in the loan market makes the bank keep it to a level where the education loan seems affordable to the customer, while it earns money for the banks too. Whether the interest rate charged on your education loan is fixed or floating is also a matter of concern. Generally, the value of fixed interest rates is higher than the floating interest rates. Going for floating interest rates in this low interest regime is always a better option. The interest rates also depend on the amount of education loan one wants, keeping in mind all the realistic requirements, a judicious comparison of various offers from leading banks will certainly help the student find an education loan that pinches the least. 2. How the interest is charged though the banks defer repayments, but they start charging the interest immediately after the disbursal of the loan. How

this interest is charged will determine the amount of interest you will pay. Enquire carefully whether it is charged on a daily reducing balance, or on a quarterly reducing balance. The interest rates charged on loans thus keep accumulating until you start the repayments. This can significantly increase the repayment burden. If the bank providing education loan gives an option to pay the interest portion of your education loan immediately, use it by all means. 3. The waiver period

the third most important thing to watch out is the waiver period. Banks providing education loans generally don't expect the student to pay until he gains employment after completion of the course. Check this out carefully, does your education loan provider gives you such an option? The whole idea is to get comfortable financially before the bank asks you for a repayment. 4. Fees and other costs the fees associated with the education loan such as processing fees, administrative fees, documentation costs etc. should be minimal. 5. Collateral, guarantee or security there is a collateral clause with all the educational loans from banks in India provided the education loan exceeds a value of 4 laces. This figure can vary from bank to bank but it is generally a norm. Make sure to ask the bank about collateral requirements and have it ready before the disbursal of loan. 6. The down payment A down payment also has to be made with every education

loan, ranging between 5%-20% of the loan amount depending on banks this money has to be paid upfront. REVISED MODEL EDUCATIONAL LOAN SCHEME FOR PURSUING HIGHER STUDIES IN INDIA AND ABROAD 1. INTRODUCTION: Education is central to the Human Resources Development and empowerment in any country. National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives. While government endeavour to provide primary education to all on a universal basis, higher education is progressively moving into the domain of private sector. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area. The scope of education has widened both in India and abroad covering new courses in diversified areas. Development of human capital is a national priority and it should be the endeavour of all that no deserving student is denied opportunity to pursue higher education for want of financial support. Loans for education should be seen as an investment for economic development and prosperity. Knowledge and information would be the driving force for economic growth in the coming years.

Based on recommendations made by a Study Group, IBA had prepared a Model Educational Loan Scheme in the year 2001 which was advised to banks for implementation by Reserve Bank of India vide circular No.RPCD.PLNFS.BC.NO.83/06.12.05/2000-01 dated April 28, 2001 along with certain modifications suggested by the Government of India. In line with the announcement made by the Hon'ble Finance Minister in his Budget Speech for the year 2004-05, IBA had communicated certain changes in the security norms applicable to educational loans with limits above Rs.4 lakhs and up to Rs. 7.5 lakhs. We have been receiving enquiries from members seeking clarifications on the various provisions of the scheme based on feedback received from the branches. With a view to ensure that the scheme is implemented in letter and spirit, it was decided to review the scheme and make modifications in the scheme to facilitate smooth operation at bank branches. Towards this, a Working Group of General Managers drawn from select banks was constituted at IBA. This revised model scheme has been prepared based on the suggestions made by the Group. 2. OBJECTIVES OF THE SCHEME : 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. 3. APPLICABILITY OF THE SCHEME: The scheme detailed below could be adopted by all Commercial Banks. The scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank will have the discretion to make changes suiting to the convenience of the students/ parents to make it more customer friendly. The scheme details are as under : 4. ELIGIBILITY CRITERIA :

4.1 Student eligibility: Should be an Indian National Secured admission to professional/ technical courses in India or Abroad through Entrance Test/ Merit Based

Selection process. 4.2 Courses eligible a. Studies in India: (Indicative list) Graduation courses : BA, B.Com., B.Sc., etc. Post Graduation courses : Masters & Phd. Professional courses : Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc. Computer certificate courses of reputed institutes accredited to Dept. of Electronics or institutes affiliated to university. Courses like ICWA, CA, CFA etc. Courses conducted by IIM, IIT, IISc, XLRI. NIFT etc. Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India. In case the course is pursued abroad, the Institute should be recognized by the competent local aviation/shipping

Courses offered in India by reputed foreign universities. Evening courses of approved institutes. Other courses leading to diploma/ degree etc. conducted by colleges/ universities approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc Courses offered by National Institutes and other reputed private institutions
Banks may have the system of appraising other institution courses depending on future prospects/ recognition by user institutions. Courses, which are not covered under the criteria mentioned above, individual banks may take a view to consider extending

education loan under the scheme taking into account the future prospects/recognition by user institution. b. Studies abroad :Graduation : For job oriented professional/ technical courses offered by reputed universities. Post graduation: MCA, MBA, MS, etc. Courses conducted by CIMA- London, CPA in USA etc.

4.3 Expenses considered for loan :

Fee payable to college/ school/ hostel.

Examination/ Library/ Laboratory fee.

Purchase of books/ equipments/ instruments/ uniforms.

Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts, subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course.

Travel expenses/ passage money for studies abroad.

Purchase of computers - essential for completion of the course.

Insurance premium for student borrower

Any other expense required to complete the course like study tours, project work, thesis, etc. 5. 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.10.00 lacs.

Studies abroad - Maximum Rs.20 lacs 6. MARGIN : Upto Rs 4 lacs Nil Above Rs. 4 lacs : Studies in India 5%

Studies Abroad 15 % - Scholarship/ assistantship to be included in margin. - Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis. 7. SECURITY : Upto Rs 4 lacs Co-obligation of parents. No security Above Rs.4 lacs and upto Rs7.5 lakhs

Co-obligation of parents together with collateral security in the form of suitable third party guarantee. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as "joint borrower". Above Rs.7.5 lakhs Co-obligation of parents together with tangible Above Rs.7.5 lakhs Co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of instalments Note:

The loan documents should be executed by both the student and the parent/ guardian as joint-borrower.

The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, shares/mutual fund units/debentures,

bank deposit in the name of student/ parent/ guardian or any other third party with suitable margin.

Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount.

In case the loan is given for purchase of computer, the computer has to be hypothecated to the Bank. 8. RATE OF INTEREST : Upto Rs 4 lacs BPLR Above Rs. 4 lacs BPLR +

1%

Simple interest to be charged during the Repayment holiday/ Moratorium period. Penal interest to be charged as applicable to individual banks. 9. APPRAISAL / SANCTION/ DISBURSEMENT : In the normal course, while appraising the loan the future income prospects of the student will be looked into. However, where required, the means of parent / guardian could also be taken into account to evaluate re-payment capability. The loan to be sanctioned as per delegation of powers preferably by the Branch nearest to the place of residence of parents. No application for educational loan received should be rejected without the concurrence of the next higher authority. 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
10. REPAYMENT Repayment holiday/Moratorium Course period + 1 year or 6 months after getting job, whichever is earlier. The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course. The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed. 1% interest concession may be provided for loanees if the interest is serviced during the study period when repayment holiday is specified for interest/ repayment under the scheme. 11. INSURANCE Banks may arrange for life insurance policy on the students availing Educational Loan. Individual Banks may work out the modalities with insurance companies 12. FOLLOW UP/TRACKING:

Banks to contact college/ university authorities to send the progress report to the bank at regular intervals in respect of students who have availed loans. In case of studies abroad, bank may obtain the Unique Identification Number (UIN)/Identity Card and note the same in the bank's records. 13. PROCESSING CHARGES No processing/ upfront charges may be collected on educational loans for studies in India. 14. CAPABILITY CERTIFICATE: Banks can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtained from applicant, if required. (Some of the foreign universities require the students to submit a certificate from their bankers about the sponsors' solvency/ financial capability, with a view to ensure that the sponsors of the students going abroad for higher studies are capable of meeting the expenses till completion of studies.)

Bad credit
Having bad credit simply means that you had trouble in the past paying your bills on time. You may have bad credit because you have been the victim of identity theft, because you have taken out too many loans, or, most likely, you simply have not paid all your bills promptly. While bad credit can make it harder for you to get the best loan rates -- or even any credit at all - today's bad credit education loans allow you to borrow money for your education. A bad credit education loan typically has different applications standard and eligibility standards, making it easier for even those with an imperfect credit history to get the best education possible. Education loans for bad credit are widely available from private lenders and from other sources. When it comes to bad credit education loan, student options are numerous, allowing almost anyone to get the money they need for school.

How to Get Loans with Bad Credit

If you don't need education loans right away, there are several things that you can do to improve your bad credit. This can help you qualify for better interest rates and may even allow you to qualify for traditional educational loans: If you don't have much of a credit history, consider getting a few bills signed over to your name and open a checking account. By paying your bills on time and balancing your account, you can build a good credit history. If you already

have credit cards or loans, work hard at paying down your loans as much as possible.

Banks
One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. In fact, depositors are the major stakeholders of the Banking System. The depositors and their interests form the key area of the regulatory framework for banking in India and this has been enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India is empowered to issue directives / advices on interest rates on deposits and other aspects regarding conduct of deposit accounts from time to time. With liberalization in the financial system and deregulation of interest rates, banks are now free to formulate deposit products within the broad guidelines issued by RBI . This policy document on deposits outlines the guiding principles in respect of formulation of various deposit products offered by the Bank and terms and conditions governing the conduct of the account. The document recognises the rights of depositors and aims at dissemination of information with regard to various aspects of acceptance of deposits from the members of the public, conduct and operations of various deposits accounts, payment of interest on various deposit accounts, closure of deposit accounts, method of disposal of deposits of deceased depositors, etc., for the benefit of customers. It is expected that this document will impart greater transparency in dealing with the individual customers and create awareness among customers of their rights. The ultimate objective is that the customer will get services they are rightfully entitled to receive without demand. While adopting this policy, the bank reiterates its commitments to individual customers outlined in Bankers' Fair Practice Code of Indian Banks' Association. This document is a broad framework under which the rights of common depositors are recognized. Detailed operational instructions on various deposit schemes and related services will be issued from time to time

Introduction of CBI
Central Bank of India, a government-owned bank, is one of the oldest and largest commercial banks in India. The bank currently has 3,168 branches and 270 extension counters across 27 Indian states. Mr. S Sridhar [Ex CMD National Housing Bank] has been appointed as the Chairman and Managing Director of state-run Central Bank of India as on 2 March 2009. The post had been lying vacant and the appointment was cleared by the government, the Bank said in a statement. To improve the

Bank's capital adequacy ratio and enable it to support the credit requirements of the productive sectors of the economy, the Centre has recently decided to infuse Rest 1,400 core in the Bank. Under the proposed capital infusion plan, Central Bank of India will get Rs 700 crore by this month-end, while the balance amount will be made available to the Bank in next fiscal.