NAEEM SHAIKH: Opening of No Frills-Zero Balance Bank Accounts for Scholarship to students of minority communities throughout India

Educational Loan Scheme

April 28, 2001
RPCD.PLNFS.BC.NO.83/06.12.05/2000-01
The Chairman/Managing Director
All scheduled commercial banks
Dear Sir
Educational Loan Scheme
The Finance Minister in a meeting with the Chief Executives of the public sector banks on 13 June
2000 had highlighted the role of commercial banks in facilitating pursuit of higher education by
poor, but meritorious students. In pursuance thereof the Indian Banks’ Association constituted
a Study Group under the chairmanship of Shri R.J.Kamath, Chairman and Managing Director of
Canara Bank to examine the issue in detail. Based on the recommendations of the Study Group,
a comprehensive model educational loan scheme was prepared by the Indian Banks’ Association
for adoption by all banks. The Scheme aims at providing financial support from the banking
system to deserving/meritorious students for pursuing higher education in India and abroad.The
scheme was announced in the Union Budget for 2001-2002 and discussed in the meeting the
Finance Minister had with the Chief Executives of banks on 7 April 2001.
2. Government of India, Ministry of Finance, Department of Economic Affairs [Banking Division]
has considered and decided to accept the Model Scheme prepared by IBA for implementation,
subject to the following modifications :
(i) The condition of minimum qualifying marks in the last examination may be dropped.
(ii) No margin may be insisted upon for loans upto Rs.4 lakh. However, for loans of
higher amounts, the margin requirement may be 5% for inland studies and 15% for
studies abroad.
(iii) No security may be insisted upon for loans upto Rs.4 lakh. However, for loans above
this amount, collateral security of suitable value or co-obligation of
parents/guardians/third party alongwith the assignment of future income of the
student for payment of instalments may be obtained.
(iv) Loans upto Rs.4 lakh may be advanced at interest rate not exceeding PLR of the
bank. Above Rs.4 lakh, the interest rate may be PLR + 1%.
3. We accordingly, forward herewith a copy of the model scheme prepared by IBA for
implementation by banks after effecting the modifications indicated at [i] to [iv] of para 2 above,
at the earliest so that its benefits are available to students from this academic session itself.
4. It is clarified that this Scheme is separate and in addition to and not in supersession of the
scheme earlier circulated by RBI under Supreme Court orders vide our circular
RPCD.SP.BC.10/09.07.01/99-2000 dated 31st July 1999 issued to public sector banks.
5. Please acknowledge receipt.
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Yours faithfully
[Varughese John]
General Manager
Encl : As above
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A MODEL EDUCATIONAL LOAN SCHEME
1. INTRODUCTION:
Education is central to the Human Resources Development and empowerment in any country.
National and State level policies are framed to ensure that this basic need of the population is met
through appropriate public and private sector initiatives. While government endeavour to provide
primary education to all on a universal basis, higher education is progressively moving into the
domain of private sector. With a gradual reduction in government subsidies higher education is
getting more and more costly and hence the need for institutional funding in this area.
The scope of education has widened both in India and abroad covering new courses in diversified
areas. Development of human capital is a national priority and it should be the endeavour of all
that no deserving student is denied opportunity to pursue higher education for want of financial
support. Loans for education should be seen as an investment for economic development and
prosperity. Knowledge and information would be the driving force for economic growth in the
coming years.
The Hon’ble Finance Minister in a meeting with the Chief Executives of the Public Sector Banks
on 13th June 2000 had highlighted the role of commercial banks in facilitating pursuit of higher
education by poor, but meritorious students. He also expressed the need to have a comprehensive
educational loan scheme prepared that could be adopted by all banks. Accordingly, a study group
under the Chairmanship of Shri R J Kamath, Chairman and Managing Director, Canara Bank was
constituted to examine the issue in detail. This model scheme has been prepared based on the
recommendations contained in the report submitted by the group in August 2000.
2. OBJECTIVES OF THE SCHEME :
The Educational Loan Scheme outlined below aims at providing financial support from the
banking system to deserving/ meritorious students for pursuing higher education in India and
abroad. The main emphasis is that every meritorious student though poor is provided with an
opportunity to pursue education with the financial support from the banking system with
affordable terms and conditions. No deserving student is denied an opportunity to pursue higher
education for want of financial support.
In short, the scheme aims at providing financial assistance on reasonable terms:
* to the poor and needy to undertake basic education.
* to the meritorious students to pursue higher/ professional/ technical education.
3. APPLICABILITY OF THE SCHEME:
The scheme detailed below could be adopted by all Commercial Banks. The scheme provides
broad guidelines to the banks for operationalising the educational loan scheme and the
implementing bank will have the discretion to make changes suiting to the convenience of the
students/ parents to make it more customer friendly.
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The scheme details are as under :
4. ELIGIBILITY CRITERIA :
4.1 Courses eligible
a. Studies in India:
* School education including plus 2 stage.
* Graduation courses : BA, B.Com., B.Sc., etc.
* Post Graduation courses : Masters & Phd.
* Professional courses : Engineering, Medical, Agriculture, Veterinary, Law,
Dental, Management, Computer etc.
* Computer certificate courses of reputed institutes accredited to Dept. of
Electronics or institutes affiliated to university.
* Courses like ICWA, CA, CFA etc.
* Courses conducted by IIM, IIT, IISc, XLRI. NIFT etc.
* Courses offered in India by reputed foreign universities.
* Evening courses of approved institutes.
* Other courses leading to diploma/ degree etc. conducted by colleges/
universities approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
* Courses offered by National Institutes and other reputed private
institutions. Banks may have the system of appraising other institution courses
depending on future prospects/ recognition by user institutions.
b. Studies abroad :-
* Graduation : For job oriented professional/ technical courses
offered by reputed universities.
* Post graduation : MCA, MBA, MS, etc.
* Courses conducted by CIMA- London, CPA in USA etc.
4.2 Student eligibility :
* Should be an Indian National
* Secured admission to professional/ technical courses through Entrance
Test/ Selection process.
* Secured admission to foreign university/ Institutions.
* Should have scored minimum 60% (50% for SC/STs) in the qualifying
examination for admission to graduation courses.
4.3 Expenses considered for loan :
* Fee payable to college/ school/ hostel.
* Examination/ Library/ Laboratory fee.
* Purchase of books/ equipments/ instruments/ uniforms.
* Caution deposit/ building fund/ refundable deposit supported by Institution
bills/ receipts.
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* Travel expenses/ passage money for studies abroad.
* Purchase of computers - essential for completion of the course.
* Any other expense required to complete the course - like study tours,
project work, thesis, etc.
5. QUANTUM OF FINANCE:
Need based finance subject to repaying capacity of the parents/ students with margin and the
following ceilings.
- Studies in India - Maximum Rs.7.50 lacs.
- Studies abroad - Maximum Rs.15 lacs
6. MARGIN :
Upto Rs.2 lacs : Nil
Above Rs. 2 lacs : Studies in India : 15%
: Studies Abroad : 25%
- Scholarship/ assistantship to be included in margin.
- Margin may be brought-in on year-to-year basis as and when disbursements are made on
a pro-rata basis.
7. SECURITY :
Upto Rs.2 lacs : No security
Above Rs.2 lacs : Collateral security equal to 100% of the
loan amount or guarantee of third person
known to bank for 100% of the loan
amount.
Note:-
* The document should be executed by both the student and the parent/ guardian.
* The security can be in the form of land/ building/ Govt. securities/ Public Sector
Bonds/ Units of UTI, NSC, KVP, LIC policy, gold, shares/ debentures, bank deposit in
the name of student/ parent/ guardian or any other third party with suitable margin.
* Wherever the land/ building is already mortgaged, the unencumbered portion can
be taken as security on II charge basis provided it covers the required loan amount.
* In case the loan is given for purchase of computer the same to be hypothecated
to the Bank.
Banks who wish to support highly meritorious/ deserving students without security may
delegate such powers to a fairly higher level authority.
8. RATE OF INTEREST :
Upto Rs.2 lacs : PLR
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Above Rs.2 lacs : PLR + 1%
* The interest to be debited quarterly/ half yearly on simple basis during the
Repayment holiday/ Moratorium period.
* Penal interest @ 2% be charged for above Rs.2 lacs for the overdue amount and
overdue period.
9. SANCTION/ DISBURSEMENT :
* The loan to be sanctioned as per delegation of powers preferably by the Branch
nearest to the place of domicile.
* No application for educational loan received should be rejected without the
concurrence of the next higher authority.
* The loan to be disbursed in stages as per the requirement/ demand directly to the
Institutions/ Vendors of books/ equipments/ instruments to the extent possible.
10. REPAYMENT:
Repayment holiday/Moratorium : Course period + 1 year or 6 months after
getting job, whichever is earlier.
The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able
to complete the course within the scheduled time extension of time for completion of course may
be permitted for a maximum period of 2 years. If the student is not able to complete the course
for reasons beyond his control, sanctioning authority may at his discretion consider such
extensions as may be deemed necessary to complete the course.
* The accrued interest during the repayment holiday period to be added to the
principal and repayment in Equated Monthly Instalments (EMI) fixed.
* 1-2% interest concession may be provided for loanees if the interest is serviced
during the study period when repayment holiday is specified for interest/ repayment under
the scheme.
11. FOLLOW UP:
Banks to contact college/ university authorities to send the progress report at regular intervals in
respect of students who have availed loans.
12. PROCESSING CHARGES :
No processing/ upfront charges may be collected on educational loans.
13. CAPABILITY CERTIFICATE:
Banks can also issue the capability certificate for students going abroad for higher studies. For this
financial and other supporting documents may be obtained from applicant, if required.
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(Some of the foreign universities require the students to submit a certificate from their bankers
about the sponsors’ solvency/ financial capability, with a view to ensure that the sponsors of the
students going abroad for higher studies are capable of meeting the expenses till completion of
studies.)
14. OTHER CONDITIONS:
No due certificate need not be insisted upon as a pre-condition for considering educational loan.
However, banks may obtain a declaration/ an affidavit confirming that no loans are availed from
other banks.
Loan applications have to be disposed of within a period of 15 days to 1 month, but not exceeding
the time norms stipulated for disposing of loan applications under priority sector lending.
In order to bring flexibility in terms like eligibility, margin, security norms, banks may consider
relaxation in the norms on a case to case basis delegating the powers to a fairly higher level
authority.
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भारतीय िरज़वर् ब􁱹क
_________________________ RESERVE BANK OF INDIA______________________
www.rbi.org.in
RBI/2010-11/232
RPCD.CO.RRB.BC No. 23/ 03.05.33/2010-11 October 13, 2010
The Chairmen
All Regional Rural Banks
Dear Sir,
Opening of No-Frills Accounts by Students for Availing various Government Scholarships
It has been brought to our notice by the Secretary, Government of India, Ministry of Minority Affairs that banks are not opening 'no-frills' accounts in favour of students from minority communities who wish to avail of the scholarships being awarded by the Ministry through the State / UT Governments. This is causing hardship to the applicants for scholarship schemes of the Government and is inviting criticism.
2. In this connection, we draw your attention to our circular RPCD.CO.No.RRB.BC.58/ 03.05.33(F)/ 2005-06 dated December 27, 2005 with regard to opening of no-frills accounts by Regional Rural Banks. You are advised to ensure opening of no-frills accounts or other accounts for students from minority communities and other disadvantaged groups to enable them to avail of various scholarships or other benefits offered by the Government. However, while opening such accounts, KYC norms as appropriate may be followed for the purpose.
Yours faithfully,
Sd/-
(R.K. Moolchandani) Deputy General Manager
_______________________________________________________________________
Rural Planning & Credit Department Central Office, 10th Floor Central Office Building, post box no.10014 Mumbai-400001
’½¢¥¸ûÅø›¸ /Tel No: 91-22-22661602 û¾ÅÆ¬¸/Fax No: 91-22-22621011/22658273/22658276 Email ID:cgmicrpcd@rbi.org.in
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RBI/2005-06/244
RPCD.CO.No.RRB.BC.58/03.05.33 (F)/2005-06
December 27, 2005
The Chairmen.
All Regional Rural Banks
Dear Sir,
Financial Inclusion – Zero balance accounts in RRBs
Please refer to Paragraph 96 of the Mid-term Review of Annual Policy Statement for the year
2005-06.
2. The Annual Policy Statement of April 2005, while recognizing the concerns in regard to
the banking practices that tend to exclude rather than attract vast sections of population, urged
banks to review their existing practices to align them with the objective of financial inclusion.
While recognising the role of RRBs in providing basic and affordable banking services in their
respective areas of operation, it is observed that the requirement of minimum balance by RRB/s
may deter a sizeable section of population from opening / maintaining bank accounts.
3. In this context, with a view to achieving the objective of greater financial inclusion, all RRBs are
advised to make available a basic banking 'no-frills' account either with 'nil' or very low
minimum balances as well as charges that would make such accounts accessible to vast sections
of population. The nature and number of transactions in such accounts could be restricted, if
considered essential, but made known to the customer in advance in a transparent manner. All
RRBs are advised to give wide publicity to the facility of such a 'no-frills' account
indicating the facilities and charges in a transparent manner.
4. In order to encourage more and more persons in their area of operation, to open 'zero balance'
accounts, RRBs may explore the provision of small overdraft facility to account holders.
The limit of such overdraft could be reviewed depending on repayment record and may not
be linked to any specific activity/end-use or security. Rates of interest may be fixed as applicable
to normal clean overdrafts. RRBs may devise a simplified account opening-cum-overdraft
application form for such facilities, while adopting simplified procedures, as appropriate to their
local conditions, for ensuring compliance with 'Know Your Customer' guidelines.
5. Please acknowledge receipt to our concerned Regional Office.
Yours faithfully,
(G.Srinivasan)
Chief General Manag

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RBI/2011-12/207
DBOD.AML.BC.No. 36/ 14.01.001/2011-12 September 28, 2011
The Chairmen/CEOs of all Scheduled Commercial Banks (Excluding RRBs)/
Local Area Banks/All India Financial Institutions
Dear Sir,
Know Your Customer Norms – Letter issued by Unique Identification Authority of India (UIDAI) containing details of name, address and Aadhaar number
Please refer to the Government of India Notification No. 14/2010/F.No. 6/2/2007-ES dated December 16, 2010 which recognises the letter issued by Unique Identification Authority of India (UIDAI) containing details of name, address and Aadhaar number, as an officially valid document as contained in Rule 2(1)(d) of the PML Rules, 2005.
2. In this regard, a reference is invited to paragraph 5 of our circular DBOD.AML.No.BC.77/14.01.001/2010-11 dated January 27, 2011, wherein it was stipulated that when bank relies exclusively on the Aadhaar letter as complete KYC document for opening of an account, such an account would be subject to all conditions and limitations applicable to ‘Small’ accounts as detailed in the Govt notification referred to above. After further consultations with Government, it has now been decided to accept the letter issued by the UIDAI as described above as an officially valid document for opening bank accounts without the limitations applicable to ‘Small’ accounts as prescribed in paragraph 5 of our circular under reference.
3. In this connection, attention is also invited to paragraph 2.4 (f) of the Master Circular on KYC/AML/CFT dated July 01, 2011, dealing with customer identification. It is reiterated that while opening accounts based on Aadhaar also, banks must satisfy themselves about the current address of the customer by obtaining required proof of the same as per extant instructions.
4. Please acknowledge receipt.
Yours faithfully,
(Deepak Singhal)
Chief General Manager in-Charge
Government of India
Ministry of Finance
(Department of Revenue)
Notification
New Delhi, the 16th December, 2010
GSR (E) – In exercise of the powers conferred by sub-section (1) read with clauses (h) (i), (j) and (k) of sub-section (2) of Section 73 of the Prevention of Money-laundering Act, 2002 (15 of 2003), the Central Government hereby makes the following amendments to the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, namely::-
1. (1) These rules may be called the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Third Amendment Rules, 2010.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, -
(a) in rule 2,-
(i) after clause (b), the following clause shall be inserted, namely:-
“(bb) “Designated Officer” means any officer or a class of officers authorized by a banking company, either by name or by designation, for the purpose of opening small accounts”.
(ii) in clause (d), for the words “the Election Commission of India or any other document as may be required by the banking company or financial institution or intermediary”, the words “Election Commission of India, job card issued by NREGA duly signed by an officer of the State Government, the letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number or any other document as notified by the Central Government in consultation with the Reserve Bank of India or any other document as may be required by the banking companies, or financial institution or intermediary” shall be substituted;
(iii) after clause (fa), the following clause shall be inserted, namely:-
“(fb) “small account” means a savings account in a banking company where-
(i) the aggregate of all credits in a financial year does not exceed rupees one lakh,
(ii) the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand, and;
(iii) the balance at any point of time does not exceed rupees fifty thousand”.
(b) In rule 9, after sub-rule (2), the following sub-rule shall be inserted, namely:-
“(2A) Notwithstanding anything contained in sub-rule (2), an individual who desires to open a small account in a banking company may be allowed to open such an account on production of a self-attested photograph and affixation of signature or thumb print, as the case may be, on the form for opening the account.
Provided that –
(i) the designated officer of the banking company, while opening the small account, certifies under his signature that the person opening the account has affixed his signature or thumb print, as the case may be, in his presence;
(ii) a small account shall be opened only at Core Banking Solution linked banking company branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to a small account and that the stipulated limits on monthly and annual aggregate of transactions and balance in such accounts are not breached, before a transaction is allowed to take place;
(iii) a small account shall remain operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking company of having applied for any of the officially valid documents within twelve months of the opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty four months.
(iv) a small account shall be monitored and when there is suspicion of money laundering or financing of terrorism or other high risk scenarios, the identity of client shall be established through the production of officially valid documents, as referred to in sub rule ( 2) of rule 9"; and
(v) foreign remittance shall not be allowed to be credited into a small account unless the identity of the client is fully established through the production of officially valid documents, as referred to in sub-rule (2) of rule 9.”
(Notification No.14/2010/F.No.6/2/2007-ES)
(S.R. Meena)
Under Secretary
Note: The principal rules were published in Gazette of India, Extraordinary, Part-II, Section 3, Sib-Section (i) vide number G.S.R.444 (E), dated the 1st July, 2005 and subsequently amended by number G.S.R.717 (E), dated the 13th December, 2005, number G.S.R. 389(E), dated the 24th May, 2007, number G.S.R. 816(E), dated the 12th November, 2009, number G.S.R.76 (E), dated the 12th February, 2010 and number G.S.R. 508(E), dated the 16th June, 2010.

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IMPORTANT LINKS
http://rbidocs.rbi.org.in/rdocs/Notification/PDFs/BCC23131010E.pdf
http://rbidocs.rbi.org.in/rdocs/notification/PDFs/67155.pdf
http://rbidocs.rbi.org.in/rdocs/notification/PDFs/67938.pdf
http://twocircles.net/2010aug04/banks_continue_denying_accounts_muslim_students.html

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