Government Credit Guarantee Fund Scheme Explained by CA Sumit Mehta

Do you know about Govt. Credit Guarantee Fund Scheme for Education Loan? A famous finance influencer, CA Sumit Mehta gives his valuable guidance on this scheme. The Indian government has initiated the Credit Guarantee Fund Scheme for Educational Loans which supports students who seek financial support to help them pay for their tuition fees and other expenses while at school. As such, collateral-free loans are aimed at making it easier for students to get loan facility without providing collateral or third-party guarantors.

Here's an overview of how it works:

Unsecured loans: According to Reserve Bank of India (RBI) guidelines, education loans upto Rs 4 lakh are unsecured. This means that no property or assets need be pledged as security by the student while availing these types of loans. It significantly reduces the financial burden on students as well as their families thereby enabling them concentrate on studies without straining about obtaining a loan.

State guarantee: For education loans above Rs 4 lakh but up to Rs 7.5 lakhs, Government of India provides guarantee. It therefore implies that in cases where a student fails to repay the loan, the government will come in and pay some portion of the defaulted amount. In this way, more financial help can be received by scholars limiting themselves from presenting any form of security as well as third party guarantees.

Guarantee Cover: Under this scheme, the government provides a guarantee cover of 75% by default. This guarantee is administered by the National Credit Guarantee Trustee Company Limited (NCGTC), which acts as a trustee appointed by the department for this purpose Since it covers a large portion of defaults, the government ensures that savings and finance institutions are more willing to provide educational loans to students.

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Finance influencer CA Sumit Mehta highlighted the advantages of the scheme and its role in ensuring access to higher education for students across India. The Loan Scholarship Scheme helps students pursue their academic goals and create a brighter future without the weight of debt by reducing the financial burden of education.