Government Launches Revamped Model Skill Loan Scheme

The Ministry of Skill Development and Entrepreneurship (MSDE) launched a revamped ‘model skill loan scheme’ for skill development courses with a fresh maximum loan limit of Rs 7.5 lakh backed by a government-promoted fund.

• Previously, the maximum loan amount was ₹1.5 lakh. 

Background

• Previous Scheme Performance
  • Low Uptake: Launched in 2015, the old scheme saw limited success with only Rs 115.75 crore loaned to 10,077 borrowers by March 31.
  • Constraints: The maximum loan limit of Rs 1.5 lakh and rising course fees led to low utilisation, as many high-cost courses were excluded.
• Availability of Formally Skilled Workforce in India: Only 5% of the so-called skilled workforce is formally skilled and hence there is a huge skilling gap that needs to be filled.

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Model Skill Loan Scheme

• About: The new Model Skill Loan Scheme builds upon the Credit Guarantee Fund Scheme for Skill Development (CCFSSD), launched in 2015, addressing the challenges of financing high-skill training amidst rapid technological advancements.
• Benefits: This initiative will help candidates from urban and semi-urban areas access affordable finance for specialised training, enhancing their placement opportunities and potential for international mobility.

Revamped Scheme Features

• Increased Credit Guarantee Cover: Loans disbursed will be backed by a guarantee against default up to 75% of the loan amount.
• Higher Loan Limit: The maximum loan amount eligible for credit guarantee cover has been increased from INR 1.50 lakhs to INR 7.50 lakhs.
• Expanded Lending Framework: Earlier, only private, public and foreign banks which were members of the Indian Banks’ Association  were eligible for facilitating loans.
  • The new scheme includes non-banking financial companies (NBFCs), NBFC-MFIs (micro-finance institutions), and small finance banks as eligible lenders, beyond just private, public, and foreign banks.
• Broadened Course Access: The revised scheme will now allow access to more skill courses, against only national skill qualification framework (NSQF)-aligned courses under the old scheme. 
  • Also, non-NSQF courses that are on boarded on the Skill India Digital Hub platform will come under the scheme.
  • The loan will provide better access to advanced-level skill courses, overcoming financial barriers to many aspiring students in acquiring futuristic and in-demand industry skills

Government’s Vision

• Future Challenges: There is a need to prepare for future technologies and job market demands. This scheme is a step in that direction.
• Strategic Planning: The government is focusing on long-term strategic planning for 2047, aiming to improve the impact of skill development on employment and the job market.

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