Dr Ishrat Husain, Governor, SBP, announced it on Tuesday and a notification in this respect was issued. The maximum amount of loan would be Rs 300,000 (that could be increased at the discretion of the bank/DFI) and would be given to students who want to study for Graduate, Postgraduate and Ph D levels, in the country or abroad.
The loans for study abroad would preferably be given for job-oriented, professional and technical courses.
The objective of the scheme is to provide term loans to needy and meritorious students through formal banking channel for pursuing further/higher/professional studies within the country or abroad in different disciplines in order to promote and enhance the level of higher education in the country.
All commercial banks (including branches of foreign banks) and development financial institutions (DFIs) interested in providing these loans for promoting education would develop the scheme after getting it approved from their respective boards of directors or competent authority (in the case of foreign bank branches).
The loans could be extended to Pakistani citizens residing in any area of Pakistan including the Federal Capital Territory, Federal/Provincial Administered Tribal Areas and Azad Jammu & Kashmir.
The loan would also be provided for obtaining diploma in any technical and professional disciplines duly recognised by the respective Provincial High Secondary Board(s)/ Technical Board(s). An amount of Rs300, 000 for any course leading to Graduation! Diploma, M.B.B .8, Engineering, Post Graduation/Ph D courses would be allowed for the prospective students.
The banks may, however, at their own discretion, fix limit(s) as they deem fit for different level of education and heads of expenditure matching with the cost of degree requirements.
The banks/DFIs should decide the debt/equity ratio and pricing of loans for education purposes, under this scheme, as per their own credit policies duly approved by their Board of Directors.
The amount of loan for tuition fee and boarding would be disbursed directly to the respective educational institution. For other expenses, banks may devise their own policies to ensure that the loan amount is not misused.
The disbursement of loan could also be made in instalments keeping in view the schedule of fee payment of the educational institution.
The loan under this scheme should be approved in the name of the 'Student (Principal Debtor)' and all documentation shall be executed by both the student and parent(s)/guardian/third party, as the case may be. Loans up to Rs 300,000 could be granted on surety / undertaking /guarantee of the parent(s)/guardian/third party (ie without collateral), at the discretion of the bank/DFI.
Loans above Rs 300,000 should, however, be secured through other/suitable collateral, including assignment of future income of the student, as might be agreed mutually between the bank and the borrower/student. The banks/DFI would execute appropriate legal documentation keeping in view the risk profile of the borrower and the loan terms and conditions.
Each bank/DFI would designate branches/offices across the country to facilitate the eligible students in getting loans under this scheme. The branches, so designated, would publicise through newspaper & banks/DFIs website.
The bank/DFI should delegate appropriate approval powers to the concerned branches/offices for expeditious approval / disbursement of loan to facilitate the students to avail the facility from their nearest place of domicile/study.
The maximum repayment period of the loan is up to 7 years after the date of completion of study. In case any student is unable to complete his/her study within the scheduled/prescribed period of study, the bank/DFI, at their discretion, could extend the completion period of study for a maximum period of 2 years, either on existing or on revised terms and conditions.
Neither any penalty on early repayment of loan nor any recurring service charges of whatsoever nature would be levied on loans granted under the scheme. The repayment of loan could be made in such instalments, as the bank/DFI may consider appropriate. The provisioning requirement would apply once the loan becomes payable.