The RBI-appointed committee does not say anything about the obstacles in the documentation process that prevents students from availing the loans

The Damodaran Committee on bank customer services has failed to address some key issues on education loans, like the absence of an authority to issue income certificates that are required to be produced to avail of interest subsidy benefit.

The committee has in its report that was released by the Reserve Bank of India (RBI) on Wednesday, said that the banks should ensure through the government subsidy or insurance facility, that the educational loans are properly priced, so no bright student is denied an educational loan to pursue higher studies. "The criteria for giving such loans should be well publicised through websites or advertisements to ensure transparency and non-discrimination in sanction of such loans."

Experts say that while it is good that the committee has advised banks to make the scheme more student-friendly and create awareness about the scheme, it has failed to point out the obstacles that are preventing students from taking advantage of the facilities like interest subsidy as they are unable to show an income certificate in the absence of the issuing authority. Overall, much was expected from the committee with regard to documentation and the repayment hassles students face over the loans.

Moneylife has reported that as many as 28 states and union territories have yet to designate the income certificate issuing authority, nearly a year after the central government finalised a scheme to provide interest subsidy on education loans for students from economically weaker sections. In the absence of an authority to issue the income certificates, students from several states are finding it difficult to avail of the interest subsidy on education loans offered by banks. (Read, "Students in 28 states fail to get interest subsidy on education loans")

According to the ministry, under the scheme formulated by the Indian Banks Association (IBA), full interest subsidy is to be provided during the period of moratorium on education loan for students for families with an annual income of less than Rs4.5 lakh.

The Damodaran Committee said in its report that it had talked to students on the scheme. "The committee received feedback that though the banks say they are liberal with the educational loan facility, the same has become very difficult as the banks have made the norms very stringent for obtaining such loans. In the meetings, students expressed a desire that there should be a non-discriminatory and transparent policy for giving educational loans. Students should have the information about eligibility on the website and also by way of advertisements, so that ineligible students do not waste time, effort and money in seeking loans from banks."

About students from rural areas, the committee said, "Feedback from rural students indicated that preference for high-end professional studies was not benefiting the average student from a rural area to get a loan to pursue higher studies." The report recommended that "the board approved policy for educational loans should indicate the minimum percentage in value or number of such loans which will be disbursed to students from rural areas."