The Skill Loan Scheme is a Government of India initiative designed to make skill development more accessible and affordable for youth and working individuals across the country. Launched in July 2015, the scheme aims to provide institutional credit support to learners who wish to enroll in skill-based courses aligned with national standards and employment needs.
By offering education loans without collateral for approved skill courses, the Skill Loan Scheme plays a crucial role in strengthening India’s skilled workforce and supporting the vision of Skill India.
Objective of the Skill Loan Scheme
The primary objective of the Skill Loan Scheme is to ensure that lack of financial resources does not become a barrier to acquiring industry-relevant skills. The scheme supports candidates who enroll in courses that are:
- Aligned with National Occupational Standards
- Structured as per Qualification Packs
- Certified under the National Skill Qualification Framework (NSQF)
These courses typically lead to a certificate, diploma, or degree, helping learners improve employability, career growth, and income opportunities.
Institutions Covered Under the Scheme
The Skill Loan Scheme is applicable across a wide network of financial institutions and training providers.
Banks and Financial Institutions
- All member banks of the Indian Banks’ Association (IBA)
- Other banks and financial institutions as notified by the Reserve Bank of India (RBI)
Banks are provided with broad operational guidelines to implement the scheme effectively and uniformly.
Eligibility Criteria
An individual can apply for a Skill Loan if they meet the following eligibility conditions:
- Must have secured admission to a recognized skill development course
- The course must be conducted by one of the following institutions:
- Industrial Training Institutes (ITIs)
- Polytechnics
- Schools recognized by Central or State Education Boards
- Colleges affiliated with recognized universities
- Training partners affiliated with:
- National Skill Development Corporation (NSDC)
- Sector Skill Councils
- State Skill Mission
- State Skill Corporation
There is no restriction on age or minimum course duration, making the scheme inclusive and flexible.
Courses Eligible for Skill Loan
- Courses must be aligned to NSQF
- Programs may be short-term or long-term
- Courses should lead to a recognized certificate, diploma, or degree
- Skill areas may include technical, vocational, manufacturing, service-sector, or emerging industry skills
Loan Amount (Quantum of Finance)
Under the Skill Loan Scheme, banks can offer loans ranging from:
- Minimum: ₹5,000
- Maximum: ₹1,50,000
The exact loan amount depends on:
- Course fees
- Duration of the program
- Associated training and assessment costs
Interest Rate
- The interest rate is generally calculated as:
Base Rate / MCLR + an additional spread (typically up to 1.5%) - The final rate may vary from bank to bank based on internal lending policies
This structure ensures that interest rates remain reasonable and aligned with prevailing market conditions.
Moratorium Period
- The moratorium period covers the entire duration of the course
- During this period, repayment is not required, allowing students to focus on completing their training without financial pressure
Repayment Period
The repayment tenure depends on the loan amount sanctioned:
- Loans up to ₹50,000:
Repayment period of up to 3 years - Loans between ₹50,000 and ₹1,00,000:
Repayment period of up to 5 years - Loans above ₹1,00,000:
Repayment period of up to 7 years
This flexible repayment structure ensures affordability for borrowers after course completion.
Expenses Covered Under the Skill Loan Scheme
The loan amount can be used to cover:
- Course fees (paid directly to the training institute)
- Examination and assessment charges
- Study material and learning resources
- Other expenses directly related to completion of the course
This comprehensive coverage ensures that learners are financially supported throughout their training journey.
Collateral Requirement
One of the key benefits of the Skill Loan Scheme is that:
- No collateral or security is required
- Banks are not allowed to demand any asset or guarantee from the beneficiary
This feature makes the scheme especially helpful for students from economically weaker sections.
Credit Guarantee Fund for Skill Development (CGFSSD)
To encourage banks to lend without collateral, the Ministry of Skill Development and Entrepreneurship (MSDE) introduced the Credit Guarantee Fund for Skill Development (CGFSSD) through a notification issued in November 2015.
Key Highlights of CGFSSD:
- Applicable to all skill loans sanctioned on or after 15 July 2015
- Administered by the National Credit Guarantee Trust Company (NCGTC)
- Provides credit guarantee cover to banks against default risk
- Enhances confidence among banks to extend loans under the scheme
Banks can apply for guarantee coverage through the NCGTC for eligible skill loans.
Benefits of the Skill Loan Scheme
- Encourages skill-based education and vocational training
- Reduces financial burden on students and trainees
- Promotes employment and self-employment opportunities
- Supports government initiatives like Skill India and Make in India
- Strengthens industry-ready workforce in emerging sectors
Authority source for Skill Loan Scheme https://www.msde.gov.in
Internal URL to use:
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