Model Skill Loan Scheme, Eligibility, Repayment Period

Context: Skill Development Minister Jayant Chaudhary launched the updated Model Skill Loan Scheme.

Model Skill Development Loan Scheme

• Objective: Provides institutional credit to individuals pursuing skill development courses aligned with National Occupations Standards and Qualification Packs.
• Training Institutes: Courses must be conducted by institutes adhering to the National Skill Qualification Framework (NSQF), leading to certifications, diplomas, or degrees.
• Applicability:
  • Available through all member banks of the Indian Banks’ Association (IBA).
  • Includes other banks and financial institutions as advised by the Reserve Bank of India (RBI).

Eligibility for the Model Skill Development Loan Scheme

• Any Indian National who has secured admission in courses run by Industrial Training Institutes (ITIs), Polytechnics, schools recognized by Central or State Education Boards, colleges affiliated with recognized universities, and training partners affiliated to the National Skill Development Corporation (NSDC), Sector Skill Councils, State Skill Mission, or State Skill Corporation.
• No age restrictions.

Model Skill Development Loan Details

• Courses: Must be aligned with NSQF.
• Course Duration: No minimum requirement.
• Loan Amount: Ranges from Rs. 5,000 to Rs. 1,50,000, recently increased to Rs. 7.5 lakh.
• Moratorium: Equivalent to the course duration.

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.

Financial Terms

• Coverage: Includes course fees, assessment, examination fees, study material, etc.
• Interest Rate: Not to exceed 1.5% per annum above the repo-linked lending rate (RLLR) or any other RBI-approved external benchmark interest rate.
• Collateral: No collateral is required.

Credit Guarantee

• Introduction: The Ministry of Skill Development and Entrepreneurship (MSDE) introduced the Credit Guarantee Fund for Skill Development (CGFSSD) in November 2015.
• Administration: Managed by the National Credit Guarantee Trust Company (NCGTC).
• Guarantee Conditions:
  • Banks can apply for a credit guarantee against defaults.
  • NCGTC provides the guarantee for a nominal fee not exceeding 0.5% of the outstanding amount.
  • The guarantee covers up to 75% of the outstanding loan amount, including interest.

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