"The finance minister has revised the ceiling of education loans. The revision from Rs 5 lakh to 7.5 lakh for study in India and from Rs 10 lakh to 15 lakh for study abroad is more realistic," says Mr S K Awasthi, a general manager with Punjab National Bank (PNB).

In the earlier scheme collateral security was not needed for an amount up to Rs 2 lakh. Now, under the new scheme, collateral will not be needed on loan up to Rs 4 lakh.

Says Mr Arun Sharma, a third-year student from IIT: ``Earlier an amount of up to Rs 2 lakh was exempt from collateral and at IIT we need more than Rs 3 lakh for studies. So, the biggest booster in the new scheme is the availability of funds for further studies, especially since collateral will not be needed.''

He adds: ``It will be particularly helpful for students from the lower class and poorer backgrounds, who cannot afford to give a collateral."

Since education loans fall in the category of priority sector lending (at par with retail trade, agricultural finances and housing loans), the interest rate is on the lower side. Loans below Rs 4 lakh are charged simple interest as per their PLRs, which could range anywhere between 11.5 per cent and 13 per cent, and amounts of Rs 4 lakh and over are charged interest at 14 per cent.

For instance, if a student, whose period of study at IIT is four years, takes a loan of Rs 4 lakh, his interest liability after four years at the rate of 14 per cent would add up to Rs 2,24,000. This added to the principal amount of Rs 4 lakh would become Rs 6,24,000.

The equated monthly installment (EMI) would be Rs 14,000 per month for a period of five years. The repayment can be spread to a maximum of seven years with a lesser EMI. After completion of studies, moratorium period is two years before the repayment of loan starts.

Of course, these figures are for nationalised banks. Foreign banks have their own rate structures. Says Mr Awasthi: ``The rate of interest of state owned banks as compared with that of MNC banks is much lower." Foreign banks charge more than 15 per cent interest.

Adds Mr A K Bhatia, a senior manager with PNB: ``In case of most MNC banks, the interest is charged on the balance as on April 1, whereas nationalised banks charge interest on a quarterly basis on reducing balance."

In any case repayment should hardly be a problem. The EMIs though steep have to be seen against high salary packages being offered to IT professionals and MBAs. Mr Bhatia also dispels the fear that nationalised banks take a long time for disbursal of loans. He says that the Reserve Bank of India has set guidelines for processing these loans and banks have to adhere to these guidelines. For example: These loans have to be processed in less than 40 days.

While a lot of students are already availing this scheme, one hopes that more students will come forward to use up this liberalised loan facility now.