The Government of India has clarified its stance on loan-related difficulties faced by farmers and students during a Lok Sabha session. In response to questions raised by Shri Sanjay Haribhau Jadhav and Shri Omprakash Bhupalsinh Alias Pavan Rajenimbalkar, Finance Minister Smt. Nirmala Sitharaman provided details on the denial of crop loans due to low CIBIL scores and the requirement of collateral for education loans.
Farmers Facing Loan Denial Due to Low CIBIL Scores
The government acknowledged that some farmers are denied crop loans by nationalized banks due to low CIBIL scores. According to the Reserve Bank of India (RBI) guidelines issued on June 27, 2014, banks are required to obtain Credit Information Reports (CIR) from Credit Information Companies (CICs) as part of their loan approval process.
- The CIBIL score is mainly used for due diligence to assess a borrower’s repayment history.
- If a farmer has defaulted on a loan from any other bank or financial institution, this information is considered while approving new loans.
To provide hassle-free credit access, the Department of Financial Services (DFS) had issued an advisory on February 4, 2019, directing banks to waive processing, documentation, and service charges for Kisan Credit Card (KCC) and crop loans up to ₹3 lakh.
Additionally, the RBI’s notification on December 6, 2024, increased the limit for collateral-free agricultural loans from ₹1.6 lakh to ₹2 lakh.
For farmers who settled loans under One-Time Settlement (OTS) or Compromise Settlement, banks allow fresh loans only after a cooling period, as per their board-approved policies.
Collateral Requirement for Education Loans
Concerns were raised in Lok Sabha regarding students being asked to mortgage non-agricultural property to avail education loans. The government clarified that as per the Model Education Loan Scheme (MELS), 2022, adopted by all Scheduled Commercial Banks (SCBs):
- No collateral security or third-party guarantee is required for loans up to ₹7.50 lakh. These loans are covered under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) by the Government of India.
- Public Sector Banks (PSBs) may provide collateral-free loans beyond ₹7.50 lakh based on their internal policies.
PM Vidyalaxmi Scheme for Meritorious Students
To further support students, the government launched the PM Vidyalaxmi Scheme on November 6, 2024. This scheme:
- Provides collateral-free, guarantor-free education loans.
- Covers students admitted to the top 860 Quality Higher Educational Institutions (QHEIs) in India.
- Offers a simplified and transparent loan application process.
Government’s Assurance
The Finance Minister assured the House that the government is closely monitoring these issues and taking necessary steps to ensure that both farmers and students receive financial support without unnecessary hurdles. Further policy revisions will be considered if required.
