The ministry of skills development and entrepreneurship has enhanced the limit of loans provided by the government for skilling under the credit guarantee fund scheme to Rs 7.5 lakh from Rs 1.5 lakh, besides widening the lending network to include small finance banks and added more courses as part of the revamped Model Skill Loan Scheme.
The government had in 2015 notified the credit guarantee fund scheme for skill development (CGFSSD) to allow aspirants to avail loans for fee-based skilling courses. However, fund utilisation under the scheme remained low with the government disbursing just Rs 115.75 crore to 10,077 borrowers in over the last eight years.
Finance minister Nirmala Sitharaman, in her Budget 2024-25 speech, said the Model Skill Loan Scheme will be revised to facilitate loans up to Rs 7.5 lakh with a guarantee from a government promoted fund. “This measure is expected to help 25,000 students every year,” she said.
Until now, the eligible member lending institutions under the scheme were public and private sector banks but a sizeable share of the skill loan market was being catered to by the non-banking financial companies (NBFCs) and micro finance institutions.
“To expand the horizon of the scheme for the benefit of larger stakeholders, MSDE with the approval of the ministry of finance has approved certain modifications in the scheme guidelines,” the ministry said.
“NBFCs, microfinance institutions and small finance banks are to be also able to take the benefit of this credit guarantee scheme,” it said, adding that even the maximum ticket size of individual loans eligible for credit guarantee cover has been increased.
Besides, courses which are not aligned to the National Skills Qualification Framework (NSQF) will also be eligible for loan under the revamped scheme provided they onboard the Skill India Digital Hub to help the government track progress.
“This scheme empowers youth with financial support for advanced skilling, through the instrument of collateral-free loans up to Rs 7.5 lakh. NBFCs, NBFC-MFIs and small finance banks have also been made eligible lenders,” Jayant Chaudhary, minister of state (independent charge), MSDE said.
“As the world, including India, undergoes rapid technological and societal shifts, our education systems and job market must adapt to keep pace,” he added.
The government is of the view that advanced level skill courses have higher course fees and access to finance is a significant constraint for many aspiring candidates to pay for futuristic and in-demand industry skills courses.
“The revamped Model Skill Loan scheme will play a vital role in increasing the skilled workforce, reducing unemployment, and enhancing economic growth by equipping individuals with the skills necessary for the evolving job market,” it said.
