In an attempt to woo young voters across the country, finance minister P Chidambaram extended the scheme of interest waiver, during the duration of the period of study, on education loans disbursed before April 1, 2009.
This waiver will benefit nearly 9 lakh students borrowers and burden the government by approximately Rs 2,600 crore in the current fiscal.
This scheme was first announced during FY10 Budget by then finance minister Pranab Mukherjee on education loans disbursed after April 1, 2009.
“However, I have noticed a sense of discrimination among students who had borrowed before March 31, 2009, struggled to pay interest during the period of study, and continued to service the loans afterwards. I think they deserve some relief. I therefore propose a moratorium period for all education loans taken up to March 31, 2009 and outstanding on December 31, 2013. (The) government will take over the liability for outstanding interest as on December 1, 2013, but the borrower would have to pay interest for the period after January 1, 2014,” Chidambaram announced in his Interim Budget speech.
In the Budget of 2009-10, Mukherjee, had introduced the Central Scheme for Interest Subsidy (CSIS) in respect of education loans and the government took over the burden of interest for the duration of the period of study and six months post the completion of the study period.
Chidambaram announced that “an estimated nearly 900,000 student borrowers will benefit to the tune of approximately Rs 2,600 crore”. “I intend to provide the funds in the current financial year itself. Accordingly, a sum of Rs 2,600 crore will be transferred to the Canara Bank, the designated CSIS banker,” he further announced.
Chidambaram informed public sector banks, at the end of December 2013, had 25,70,254 student loan accounts and the amount outstanding was Rs 57,700 crore.