SKILL LOAN SCHEME (Syllabus: GS Paper 2 – Govt Policies)

Context: The Finance Minister of India has announced a revision to the Model Skill Loan Scheme, aiming to enhance support for skill development initiatives.

Skill Loan Scheme

• About: It provides financial assistance to students pursuing technical courses offered by training institutes, polytechnics, and similar institutions.
• This programme is available through banks that are members of the Indian Banks' Association (IBA) and other financial organisations approved by the Reserve Bank of India (RBI).
• Eligibility: To be eligible for the Skill Loan Scheme, individuals must have secured admission to a course conducted by one of the following institutions:

o Industrial Training Institutes (ITIs)

o Polytechnics

o Schools recognised by the State or Central Board of Education

o Colleges affiliated with a recognised university

o Training partners affiliated with the Sector Skill Councils, National Skill Development Corporation (NSDC), State Skill Mission, or State Skill Corporation.

• Duration of Course: There is no minimum duration requirement for the course.
• Quantum of Finance: Loans range from Rs. 5,000 to Rs. 1,50,000, now increased to Rs. 7.5 lakh.
• Risk of banks: It covered through Credit Guarantee Fund Scheme for Skill Development (CGFSSD)

o Under the scheme of CGFSSD, interest rate to be charged by Member Lending Institution (MLI) should not be more than 1.5% per annum over Base Rate.