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NEDUMARAN (SELF)     20 May 2014

Interest subsidy

My daughter obtained educational loan to the tune of Rs.3 lakhs during the period 2006-2010 (4 years).  I have paid the interest periodically. After getting an appointment,  In the year 2011, April onwards my daughter scheduling the repayment with a fixed EMI, and paid it update.  The bankers didn't offer the interest subsidy during the period of 2009-2010 (ie. final year) and 2010-2011 (one year halting period after completion). 

Now I approached the banker for interest subsidy, which I have paid already, or atleast during the period of 2009-2011.  They said there is no outstanding of interest as on 31.12.2013.  Hence, there is no chance to get relief from the subsidy scheme.  

Is it correct?  Is it not discrimination between a defaulter and a genuine repayer,

Kindly provide advice in this regard,


 3 Replies

malipeddi jaggarao (retired banker)     24 May 2014

The rules circulated by IBA (Indian Banks Association) relating to interest subsidy is as follows:

Central Scheme to provide Interest Subsidy- (CSIS)

The scheme provides full interest subsidy during the period of moratorium on education loans taken by EWS students for pursuing any of the approved courses of studies in technical / professional streams from recognized institutions in India.


Linked with the existing education loan scheme of IBA and  is restricted to students enrolling in recognized professional courses ( after class XII) in India, in educational institutions established by Act of Parliament, other institutions recognized by the concerned statutory body, IIMs and other institutions set up by the Central Government .

Also applicable to the students of accredited universities/ institutions and recognized professional courses, which are administered by the Ministry of Tourism.

Moratorium Period

Course Period plus one year or six months after getting job, whichever is earlier.

Income Limit / Proof

To avail the benefit, Income certificates issued by designated state authorities to be submitted. 

Eligibility for Subsidy

The interest subsidy shall be available to the eligible students only once, either for the first undergraduate degree course or the post graduate degrees / diplomas in India inclusive of integrated courses (graduate + post graduate).

Interest subsidy under this scheme shall not be available for those students who either discontinue the course midstream or who are expelled from the Institutions on disciplinary or academic grounds.


 However, the interest subsidy will be available for the actual period of study, only if the discontinuation was due to medical grounds for which necessary documentation to the satisfaction of the Head of educational institution will have to be given.  


Now you ask the bank to adjust your repayment towards principal and claim the interest as subsidy.  It is not that only unpaid interest covers under subsidy.  Many Bank officials are not aware of their own rules.  Obtain the statement of account for the entire period, find out the interest during the study period and moratorium period and give an application to the Branch Manager claiming interest remission as subsidy.  If they do not heed, next higher authority.  If no satisfactory reply lodging a complaint with Banking Ombudsman.

T. Kalaiselvan, Advocate (Advocate)     03 January 2015

Well explained by expert Mr. Malipeddi Jagga Rao, which is an interesting information to me too, thank you sir.

malipeddi jaggarao (retired banker)     04 January 2015

Thank you Shri Kalaiselvan ji!  As it is my subject for 30+ years, I am keen about answering such queries to the near perfection.  Thank you.

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