What is a Skill Loan?
A Skill Loan is a financial assistance scheme designed to help individuals fund their vocational or technical training programs.
What is the Model Skill Loan Scheme/ Credit Guarantee Fund Scheme for Skill Development?
It is a scheme notified by Ministry of Skill Development & Entrepreneurship that provides credit guarantee cover of 70%-75% to Banks/ Non-Banking Financial Companies for offering collateral free skill development loans up to ₹7,50,000, thereby making it easier for students to access financial aid for training.
Who is eligible for a Skill Loan?/ Am I eligible for a Skill Loan?
Eligible Borrower” means any new or existing borrower with Indian Nationality who meets the eligibility criteria with minimum qualifications to undergo skill training for the National Skill Qualification Framework (NSQF) aligned courses and/or the Non-NSQF aligned courses by the training entities onboarded on the MSDE’s Skill India Digital Hub (SIDH) platform, and who has executed the loan documents with the lending institutions to avail the loan. If the student is a minor, while the parent(s) would execute the documents, the lender will obtain a letter of acceptance/ratification from the student upon becoming major.
Is there any requirement of a co-applicant? If yes, who will be the co-applicant?
Yes. Parents /guardians will be the co-borrowers.
Is there any collateral or guarantee required to avail a Skill Loan under the Model Scheme?
No, the scheme does not require a third-party guarantee or collateral, as the loans are covered under a credit guarantee fund.
Does NSDC directly provide Skill Loans to applicants?
No, NSDC does not disburse loans directly. Skill loans are offered through partnered banks and financial institutions.
Whether NSDC provides the default guarantee under the Model Skill Loan Scheme/ Who provides the default guarantee under the Model Skill Loan Scheme?
NCGTC (National Credit Guarantee Trustee Company) provides guarantee against default in repayment of skill loans extended by the lending institutions and not by NSDC directly.
What is the extent of guarantee coverage under the Model Skill Loan Scheme?
The scheme offers up to 75% credit guarantee coverage to lending institutions under the CGFSSD.
Where can I apply for a Skill Loan?
You can approach the registered Bank or Non-Banking Financial Company (NBFC) that is a part of the Model Skill Loan Scheme.
How can I apply for the skill loan under the Model Skill Loan Scheme? Or What is the process for candidates to apply for the loan?
You can apply by visiting a participating Bank/ NBFC or applying online through their loan portals.
Which Banks/ NBFCs are registered under the Model Skill Loan Scheme?
You are requested to visit CGFSD to get the updated list of Banks and NBFCs offering skill loan under the scheme.
What is the Eligible Loan Amount under the Model Skill Loan Scheme?
Loan amounts range from ₹5,000 to ₹7,50,000 depending on the duration and nature of the course.
What is the maximum loan tenure for Skill Loans?
The repayment period can extend up to 7 years, including the moratorium period.
What is the interest rate for Skill Loans?
The Interest Rate to be charged by the Member Lending Institution should not be more than 1.5 % p.a. over External Benchmark Lending Rate (EBLR) for Scheduled Banks and 21% p.a. for Non-Banking Financial Company (NBFC)/Non-Banking Finance Company-Micro Finance Institutions (NBFC-MFIs).
Which courses qualify under the Model Skill Loan Scheme?
The course is run by Industrial Training Institutes (ITIs), Polytechnics or in a school recognized by central or State education Boards or in a college affiliated to recognized university, training partners affiliated to National Skill Development Corporation (NSDC)/Sector Skill Councils, State Skill Mission, State Skill Corporation, preferably leading to a certificate / diploma / degree issued by such organization as per National Skill Qualification Framework (NSQF). The Government of India / State Governments may, from time to time, notify institutes/organizations for the purpose. Courses run by above mentioned Training Institutes aligned to National Skill Qualification Framework (NSQF) shall be covered by the Skill Loan. There is no minimum course duration. In addition, the non-NSQF aligned courses on-boarded on the MSDE’s Skill India Digital Hub (SIDH) portal shall also be covered under the scheme, with no minimum course duration. The list of non-NSQF courses onboarded on SIDH portal can be accessed at under Matrix Data tab.
Are courses offered by NSDC-affiliated Training Partners covered under the scheme?
Programs offered by NSDC-affiliated training partners which are onboarded on SIDH portal are eligible for funding under the scheme.
Is there a processing fee charged by lenders under this scheme?
There is no processing fee for loans under the Model Skill Loan Scheme.
Can I prepay the skill loan? If Yes, are there any prepayment penalties?
Yes, prepayment is allowed, and there are no charges for early repayment.
Is there a moratorium period available under the scheme?
Yes, a moratorium is provided at the discretion of lending instituiton which includes the course duration plus an additional grace period of 6-12 months after course completion depending upon the course duration. The lenders may have instalment during the course period itself. However, the total amount paid by the student as down payment towards course fee and Equated Monthly Instalments (EMI) during the course together should not exceed 10% of the total course value.
Will boarding and lodging expenses be covered if I enroll in a residential course?
The loan may include costs related to boarding and lodging if that has been found necessary for necessary for completion of the course. The same could be considered on merit based on the cost of living in the particular area.
Can the Skill Loan cover additional expenses related to the course?
Any other reasonable expenditure found necessary for completion of the course including but not limited to assessment fee, examination fee, library charges, laboratory fee, caution deposit, purchase of books, equipment’s and instruments, etc. may be covered under the skill loan.
What are the required documents for loan approval?
The document requirements may vary depending on the member institution. Generally, the documents required include PAN, Aadhaar, bank statements, Admission Letter from your Training Institute and Income Proof.
Who receives the loan disbursement – the student or the training partner?
The loan amount is disbursed directly to the training institution.
Overview
Access to finance is a significant constraint for aspiring candidates to pay for futuristic and in-demand industry skills courses. Under the Skill Loan initiative, NSDC gave a line of credit to NBFCs/Micro Finance Institutions at concessional rates to pass on the benefit of subsidised lending to candidates in the form of affordable interest rates. The Skill Loan Guarantee Scheme anchored by Ministry of Skill Development & Entrepreneurship enables aspiring candidates to avail collateral free skill loans for undertaking advanced level in-demand skill courses having good placement potential.
Objective
Today ‘Skill Economy’ is market led as new age learning is finding its way in the skill development eco-system. We are witnessing an accelerated fee-based market as youths from urban and semi urban areas are recognizing the availability of skilling and livelihood improvement opportunities. There are ample opportunities for choice of skill courses for any aspiring candidate in sectors such as healthcare, IT, AI-data science, cloud application, digital marketing, hospitality, animation, gaming, graphic designing, drone technology, etc. These are demand led courses for which the fee is paid by the candidate through self-financing or by availing skill-loan. To scale up the market for fee-based advanced level skill courses, there is a need to ensure availability of funding avenues for candidates to undertake such advanced level courses as these courses entail higher course fees. Access to finance is a significant constraint for many aspiring candidates to pay for futuristic and in-demand industry skills courses. Skill Loan Guarantee Scheme (Scheme) anchored by Ministry of Skill Development & Entrepreneurship has been modified in July 2024 to ensure supply of affordable institutional credit to individuals for undertaking skill development courses.
The Modified Skill Loan Guarantee Scheme notified in July 2024 brings significant changes compared to the earlier scheme launched in July 2015. These changes are aimed at expanding the scheme's reach and effectiveness in supporting skill development across India.
Key Modifications in the July 2024 notifications - 2015 Scheme:
- Loan Limit:
- 2015 Scheme: The maximum loan amount was capped at ₹1.5 lakh.
- 2024 Scheme: The loan limit has been increased to ₹7.5 lakh, allowing students to access larger financial support, especially for high-cost courses.
- Eligible Lending Institutions:
- 2015 Scheme: Only banks were eligible lending institutions for providing loans.
- 2024 Scheme: The revised scheme includes non-banking financial companies (NBFCs), micro-finance institutions (MFIs), and small finance banks as eligible lenders, broadening the access points for students.
- Course Coverage:
- 2015 Scheme: Primarily focused on courses aligned with the National Skill Qualifications Framework (NSQF).
- 2024 Scheme: Now includes a wider range of skill development courses, including non-NSQF courses offered by Training Entities on-boarded on Skill India Digital Hub (SIDH), thereby offering more options for students.
- Course Fee:
- 2015 Scheme: Only tuition/course fee was included as an eligible component for loan
- 2024 Scheme: Apart from the regular course fee, the component of skill loan also includes any other reasonable expenditure found necessary for completion of the course including but not limited to assessment fee, examination fee, library charges, laboratory fee, caution deposit, purchase of books, equipment’s and instruments, etc. may also be covered. Also, the cost of boarding and lodging if necessary be considered on merit based on the cost of living in the particular area.
- Credit Guarantee and Accessibility:
- 2015 Scheme: The uptake was low due to stringent credit requirements.
- 2024 Scheme: With enhanced credit guarantees cover, skill loans will be more accessible even to those with weaker credit histories.
- Strategic Focus:
- 2015 Scheme: Focused broadly on supporting skill development.
- 2024 Scheme: Aligns with long-term strategic goals, such as adapting to future technologies and job market changes.
The modified scheme is expected to benefit the skilling eco-system in varied ways:
- Increased Enrollment: Easier access to loans for students will lead to higher enrollment rates for training partners thereby expanding their market reach.
- Reduced Rejections with increased financial Security to lending institutions: The guarantee provided by the scheme reduces the risk for financial institutions, encouraging them to offer loans to even students from economically weaker sections who might not have been able to afford skill development training otherwise.
- Sustainability: The increased and steady flow of students and funds will help skilling institutions sustain and grow their operations, contributing to the overall success of the skill development ecosystem in India.
These modifications are expected to make the scheme more impactful by addressing the limitations of the previous version, especially in terms of financial accessibility and the variety of courses covered.
Faq's
