Education Loan: Govt expands credit guarantee scheme to cooperative banks; loans up to Rs 7.5 lakh

The Government of India has expanded the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) to include eligible Scheduled State Cooperative Banks and Scheduled Urban Cooperative Banks as Member Lending Institutions (MLIs). Under the scheme, education loans of up to Rs 7.5 lakh can be covered without collateral security or third-party guarantee.

The move is aimed at widening access to education loans for students pursuing higher education. The newly included cooperative banks will be eligible to provide education loans covered under the credit guarantee scheme if they meet the prescribed financial and regulatory conditions.

The notification follows earlier government notifications issued in 2015, 2023 and 2025 for the CGFSEL. Regional Rural Banks (RRBs) were included as Member Lending Institutions under the scheme through the November 24, 2025 notification.

The maximum education loan limit under the Credit Guarantee Fund Scheme is Rs 7.5 lakh. Loans covered under the scheme do not require collateral security or a third-party guarantee.

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Education loan interest rate

The interest rate charged by member lending institutions on education loans covered under CGFSEL should not exceed 2% per annum over the applicable base rate.

The fund can revise this ceiling depending on the prevailing interest rate scenario, the base rates of lending institutions and the credit policies of the Reserve Bank of India.

Education loans carrying an interest rate above the prescribed ceiling will not be eligible for guarantee coverage where the base rate is applicable.

The scheme also specifies the margin requirement based on the loan amount and whether the student is studying in India or abroad.

Thus, students seeking an education loan of up to Rs 4 lakh will not have to provide a margin under the scheme.

Which banks offer education loans under CGFSEL

Scheduled State Cooperative Banks and Scheduled Urban Cooperative Banks will have to meet specific eligibility criteria to become Member Lending Institutions under the education loan credit guarantee scheme.

• The bank must be included in the Second Schedule of the Reserve Bank of India Act, 1934. It should not have been under the Reserve Bank of India's Supervisory Action Framework during the previous two financial years.
• The bank should also not have faced a monetary penalty during the last three years. It must maintain a Capital to Risk (Weighted) Assets Ratio (CRAR) of at least 11.5% during the previous two financial years.
• Other conditions include a minimum net worth of Rs 100 crore as per the preceding audited financial year, gross non-performing assets (GNPA) below 7% and net non-performing assets (NNPA) not exceeding 3%.
• The bank should also have recorded a net profit in at least three of the previous four financial years. In case of a net loss in any year, an Urban Cooperative Bank should have recorded an operating profit in that year.

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Education loans not covered under CGFSEL

Certain education loans will not be eligible for coverage under the credit guarantee scheme. These include loans whose risks are already additionally covered by the government, an insurer or another person or association carrying out insurance, guarantee or indemnity business, to the extent of such coverage.

Loans that do not comply with applicable laws, Central Government directions or RBI instructions will also be excluded.

The National Credit Guarantee Trustee Company (NCGTC) will provide guarantee coverage against default on eligible education loans up to Rs 7.5 lakh extended by participating Member Lending Institutions. However, NCGTC reserves the right to accept or reject proposals referred by lending institutions under the scheme.