Corpus to help underprivileged students access cheap educational loans.

The government may increase the education cess in the Budget as part of a plan to create a corpus to provide cheap loans to students from low-income families.

This was discussed at a meeting chaired by the Prime Minister’s Principal Secretary, TKA Nair, on January 12 with the Indian Bank Association, industry bodies and human resource development ministry officials. Several other issues like enlarging the moratorium and increasing the payment period were also discussed in the meeting.

This move is made in order to bring down the interest rates on educational loans by 400 basis points. Agricultural and educational loans forms 40% of the portfolio of banks which shows that it calls for subsidy to this sector from the government.

The final rates of education cess are not yet decided. Currently, education cess is levied @ 2 %. It is imposed on income tax, corporation tax, excise, Customs duties and service tax. The education cess was imposed in the budget for the year 2004-05 and yields Rs 4,000-5,000 crore a year. The main purpose of introduction of such cess was to create a corpus to provide elementary education in the rural areas and also to subsidize the rate of interest on educational loans.

A further increase in education cess will add to the corpus for education and thus reduce the interest burden on needy students and also contribute in bettering the literacy rate of the country. If the funds are utilized in the right channel, this could be said to be a great move by government. It is certainly going to help the poor mass of the country, which is deprived of education due to non-availability of resources.

Popularity: 1% [?]