Education Loans for OCI Cardholders for Studying Abroad: Clarification by RBI
RBI has finally brought much-needed clarity with regard to Education Loans for OCI Cardholders. The central bank has clarified that henceforth, the Overseas Citizens of India, OCI cardholders, would be eligible for loans to pursue studies abroad in India. This comes after the recent intervention by the regulator following a representation by Indian Overseas Congress. According to the statement by RBI in August, the OCI cardholders residing in India would henceforth be able to access higher education funds sans unnecessary hurdles.
Salient Features of RBI's Explanation
1. Education Loans for Resident OCIs
The explanation provided by RBI entitles the OCI cardholder resident in India to education loans for studying abroad under the Model Education Loan Scheme. Banks had earlier approached for interpretation if such loans were to fall under LRS or specific conditions applied. Indeed, this explanation has made amply clear the fact that resident OCIs are entitled to such loans for international education—a huge development in facilitation of access to finance for this category of students.
2. Liberalised Remittance Scheme (LRS) Application
One of the basic questions that banks asked is whether education loans for resident OCIs will fall under the Liberalised Remittance Scheme. As mentioned under the scheme, resident individuals, including minors, can remit $250,000 per financial year for permissible transactions, including for education expenses. The RBI explained that the LRS does not restrict the remittance of domestically borrowed funds for current account transactions like education. As such, resident OCIs can remit funds under this scheme without any upper limit on the loan amount for education purposes.
3. Loans for OCIs Residing Outside India
As against resident OCIs, non-resident OCIs can avail themselves of education loans from Indian banks only for studies conducted in India. This difference underlines the stand taken by the RBI on capital account liberalisation, which restricts the borrowing by non-residents when it is for use outside the country. The result is that non-resident OCIs can get education loans to study in India but not to pursue foreign education.
Demand for education loans is increasing.
In fact, education loans have been in great demand with increasing global mobility of students and soring tuition costs abroad. This becomes evident from the fact that public sector banks have seen 17 percent year-on-year growth in the number of accounts and 14.8 percent in amount disbursed towards education loans in FY24, informed Pankaj Chaudhary, Minister of State for Finance. The PSBs have disbursed₹ 28,699 crore towards education loans during the current fiscal year, indicating an increased need for financial support amongst Indian and OCI students.
Though there is no separate data available as to loans granted specifically to OCIs, this clarification by the RBI can be expected to enhance access to funds for a substantial portion of the Indian diaspora holding OCI cards and residing in India.
Conclusion
Therefore, the RBI’s clarification on education loans for OCI cardholders is a very welcome move that will ensure students holding an OCI status in India can undertake higher education abroad without any financial constraints. Secondly, the RBI has clarified remittance and capital account liberalisation. This solution was much needed and would be welcomed by students and lenders alike.
