Model Skill Loan Scheme

The Skill Loan Scheme was launched in July 2015 to provide institutional credit to individuals for skill development courses aligned to National Occupations Standards and Qualification Packs and leading to a certificate/diploma/degree by training institutes as per National Skill Qualification Framework (NSQF).

Ministry of Skill Development & Entrepreneurship (MSDE) during July 2024 launched the revised Model Skill Loan Scheme. It aims at providing access to skilling courses, including high-end courses which often come with high course fee, without any financial constraints. This will empower the youth of India to be future- ready workforce.

Overview of the scheme

• Any individual who has secured admission in a course run by Industrial Training Institutes (ITIs), Polytechnics or in a school recognized by Central or State education Boards or in a college affiliated to a recognized university, training partners affiliated to National Skill Development Corporation (NSDC) / Sector Skill Councils, State Skill Mission, State Skill Corporation Courses Aligned to NSQF
• Quantum of Finance - Rs 5000-7,50,000
• Duration of Course - No minimum duration
• Rate of Interest - Base rate (MCLR) + an add on typically up to 1.5%
• Moratorium - Duration of the course
• Repayment Period - Between 3 to 7 years basis the amount of loan
  
  • Loans upto Rs 50,000 - Upto 3 years
  • Loans between Rs 50,000 to 1 lakh - Upto 5 years
  • Loans above Rs 1 lakh - Upto 7 years
• Coverage - Course Fees (directly to the training institute) along with expenses towards completion of the course (assessment, examination, study material, etc.)
• The scheme does not allow for a collateral to be charged from the beneficiary.

Implementation agencies

• This scheme is implemented by banks, NBFCs, Micro Finance Institutions, and Small Finance Banks
• MSDE, through a November 2015 notification, brought into force the Credit Guarantee Fund for Skill Development (CGFSSD) for all skill loans sanctioned on or after 15 July 2015, to be administered by the National Credit Guarantee Trust Company (NCGTC).
• Banks can apply to the NCGTC for credit guarantee against defaults and NCGTC will provide this guarantee at nominal fee which shall not exceed 0.5% of the amount outstanding. The guarantee cover will be for a maximum of 75% of the outstanding loan amount (including interest, if any).

Source : Ministry of Skill Development and Entrepreneurship