The education ministry is working with the finance ministry on a road map involving state education departments, state-level bankers’ committees (SLBCs) and higher education institutions (HEIs) to improve access to education finance. Banks disbursed about Rs 39,000 crore in education loans in FY26.
“At around 50,000 higher education institutions, banks will be organising camps so that loans can be sanctioned on the spot,” said a government official aware of the developments. “Banks have been directed to bring the turnaround time to 10 days, which means finalising the loan sanction within this deadline,” he said.
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A senior bank executive said about 1,000 institutions had already been identified where students are being offered on-the-spot sanctions.
“In some cases we are also waiving off any miscellaneous charges,” the executive said. More than 380,000 education loan applications were sanctioned in FY26.
The government is also considering enhancing the credit guarantee cover for collateral-free education loans, a move that could allow banks to lend beyond the current Rs 7.5 lakh limit without seeking collateral. Interest rates under the scheme are capped at a bank’s externally benchmarked lending rate plus 50 basis points.
“We are also looking at removing the requirement of a co-applicant in the loans that get the guarantee cover,” said the official quoted earlier.
CGFSEL Coverage
At present, the Credit Guarantee Fund Scheme for Education Loans (CGFSEL), operated by the National Credit Guarantee Trustee Company, covers 75% of loans of up to Rs 7.5 lakh under eligible schemes, including the Model Education Loan Scheme.
In December 2025, a parliamentary standing committee recommended raising the CGFSEL guarantee cover to Rs 20 lakh, citing rising education costs, fee inflation and the growing need for collateral-free loans. On Tuesday, FM Nirmala Sitharaman told LS that the Pradhan Mantri Vidyalaxmi Scheme (PMVLS) has an interest subvention outlay of Rs 3,600 crore for the period from 2024-25 to 2030-31.