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 aim’s 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. That’s 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 loan-
The 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.