The Reserve Bank of India (RBI) declares new updates pertaining to education loans for Overseas Citizens of India (OCI) living in India!

Recently, RBI announced that OCI cardholders are now eligible to apply for and receive education loans for studying abroad, bringing them on par with Indian citizens in terms of access to education funding. This news marks a great beginning for OCI cardholders who now have financial clarity and access to education loans to pursue higher studies anywhere across the world.

Why the New Guideline for OCI Cardholders in India?

This latest RBI guideline for abroad education loans came in response to queries from banks that had sought guidance on the Model Education Loan Scheme norms. Indian Banks particularly needed a clarity on whether loans sanctioned to OCI residents of India should be treated under the Liberalised Remittance Scheme (LRS). To clear the air of doubts, RBI gave this confirmation for OCI cardholders residing in India.

Adding further to the concerns raised by the banks whether such student loans for studying abroad should be classified under the LRS, the RBI executive confirmed that LRS places no restrictions on the remittance of funds. This is applicable for funds borrowed domestically for current account transactions, including education purposes.

This means that any OCI cardholder residing in India can freely take education loans from Indian banks to fund their international education and send the necessary payments abroad without any legal or financial difficulties.

However, it’s important to note that OCI cardholders residing outside India are subject to different rules. As per the RBI’s clarification, OCI cardholders living outside India are limited to loans for studying within the country.

An Overview of Liberalised Remittance Scheme (LRS)

RBI’s Liberalised Remittance Scheme (LRS) allows resident individuals, including minors, to remit up to $250,000 per financial year. This can be for various permissible transactions such as overseas education, travel, and maintenance of close relatives. Under the LRS, funds can be transferred to the current or capital account transaction or a combination of both.

Growing Demand for Education Loans

The recent clarification comes at a time when the demand for education loans is steadily rising. According to the data shared in the Lok Sabha by the Minister of State for Finance Pankaj Chaudhary, the state-run banks saw a year-on-year growth of 17% in terms of the number of accounts and 14.8% in the total amount disbursed towards education loans. This was for the financial year 2024. Numerically speaking, the public sector banks disbursed INR 28,699 crores in education loans during this period.

While there is no separate data available on loans given to OCIs, the rising number of applications for education loans indicates that more students are seeking financial assistance for their higher education in India or abroad.

With the RBI’s clarification, OCI students can now confidently plan their higher education without financial uncertainties. With Indian banks offering competitive loan schemes at low interest rates and flexible repayment options, this guideline makes education loans a highly attractive option for OCI students.

If you are an OCI cardholder and want to explore how you can benefit from this development, then you can connect with Team Élan today! Our experts are here to guide and assist you throughout the overseas education loan process.