Skill Loan Scheme(SL)

Overview

About SL

This scheme sits in scholarship listings, and it is not a scholarship. It is credit for a skilling course: a bank or an NBFC pays the training institute, interest runs on the amount, and the trainee repays it in instalments. The size of the loan changed in 2024. Presenting the Union Budget for 2024-25, the Finance Minister said the Model Skill Loan Scheme would be revised to allow loans of up to Rs 7.5 lakh, a step the government expected to help 25,000 students every year (PIB, 23 July 2024).

The Ministry of Skill Development and Entrepreneurship owns the scheme; the lending is done by banks and non-bank lenders, and the ministry's role is to fix the model terms they follow and to stand behind part of the default risk. That is why the scheme page lives on the MSDE site while no ministry office ever sanctions a rupee of it. The model terms themselves sit in a scheme document that lenders work from, and the copy read for this page is the one published by the Telangana State Level Bankers' Committee (Skill Loan Scheme, model text updated 30 August 2024).

The revision was launched at Kaushal Bhawan on 25 July 2024. The maximum ticket size of an individual loan eligible for credit guarantee cover went to Rs 7.50 lakh from Rs 1.50 lakh, and NBFCs, micro finance institutions and small finance banks became eligible lenders alongside scheduled banks, with the guarantee running to 75% of the loan disbursed (PIB, 25 July 2024).

Take-up has stayed small, which is worth knowing before anyone plans around this loan. The fund's cumulative count stood at 13,072 skill loans totalling Rs 155.37 crore by 31 August 2025, and the revamped terms account for only 2,595 of them, or Rs 34.61 crore (MSDE Year End Review 2025). Set against the 25,000 students a year the Budget expected to reach, a trainee walking into a branch is asking for something that branch may genuinely never have processed.

Expect stale figures in circulation. The ministry's own Annual Report for 2023-24 still carries the pre-revamp description of the scheme, with the smaller ceiling and an interest cap pegged to the base rate rather than to the external benchmark that replaced it (MSDE Annual Report 2023-24). Bank product pages and aggregator listings repeat the old number too, so check the ceiling against the lender's current sanction letter rather than a web page.

Who runs it

Provider

At a glance

Key details

Calendar

Important dates

There is no application window. MSDE launched the Credit Guarantee Fund Scheme for Skill Development in July 2015 (PIB, 25 July 2024), and the scheme record publishes no closing date, so a trainee applies once a course is confirmed rather than in a season.

The dates that matter now are the revision's. Modifications were approved in June 2024 and notified on 9 July 2024 (MSDE Year End Review 2025), the revised scheme was launched on 25 July 2024, and the model text lenders work from carries an update date of 30 August 2024. A figure quoted from before July 2024 is describing the old scheme.

Who can apply

Eligibility criteria

Nationality and admission do most of the work here. The borrower has to be an Indian national who has secured admission to a skill training course and meets whatever minimum qualification that course demands, and the model scheme sets no minimum course duration and no age bar of its own (Skill Loan Scheme, model text updated 30 August 2024).

The institute matters more than the trainee's marks. The eligible-provider list runs from ITIs and polytechnics through recognised school boards and affiliated colleges to NSDC training partners, Sector Skill Councils and the state skill missions and corporations, and since the revision it also takes in courses outside the National Skill Qualification Framework wherever the training entity is onboarded on the ministry's Skill India Digital Hub platform (Skill Loan Scheme, model text updated 30 August 2024). That list is not closed, because the central and state governments can notify further institutes and organisations for the purpose, but it is binding while it stands: a course from a provider outside it cannot be brought under the scheme by any lender, however good the course is.

Expect a co-borrower on the file. The model text puts parents or guardians in as co-borrowers, and where the trainee is a minor the parent executes the documents and the lender takes a letter of ratification once the trainee attains majority (Skill Loan Scheme, model text updated 30 August 2024). Lenders go further than that in practice: State Bank of India takes the parent or guardian as a joint borrower and adds the spouse as a co-applicant where applicable (SBI Skill Loan Scheme), and Central Bank of India requires the parent to sign the loan document alongside the student borrower (Cent Skill Loan).

Credit history cuts both ways. A trainee is normally assumed to be creditworthy because there is no borrowing record to look at, but the model text lets a lender frame its own criteria where the record is adverse, which is the single most common reason a file stops moving.

Who cannot apply

Exclusions

MSDE publishes no bar list for this loan, and that follows from what the scheme is: a credit guarantee arrangement screens on credit and on the training provider, not on caste, income or state of domicile. Nothing in the model text keeps a category of applicant out.

What does keep people out is the provider test and the credit test described above, plus the ceiling itself. The scheme's own range stops at Rs 7,50,000 (Skill Loan Scheme, model text updated 30 August 2024), and that is also the largest individual ticket eligible for credit guarantee cover (PIB, 25 July 2024). A costlier course is not barred, but anything a lender advances beyond that ceiling falls outside this scheme and outside its cover, on whatever terms the lender chooses to set for it.

Continuation

Renewal conditions

There is nothing to renew. The loan is sanctioned once, against one course, and it runs to the end of its repayment tenure without any yearly re-application or annual eligibility test of the kind a scholarship carries.

What happens instead is drawdown. Tuition and course fees are paid by the lender straight to the training institute rather than into the trainee's account, and other costs the course genuinely needs, including assessment and examination fees, books, equipment and instruments, can be added to the same sanction (Skill Loan Scheme, model text updated 30 August 2024). Boarding and lodging are treated as unusual for a skilling course and are considered only on merit.

What you get

Award & benefits

The loan runs from Rs 5,000 to Rs 7,50,000 with no collateral security and no third-party guarantee, and the lending institution charges no processing fee (Skill Loan Scheme, model text updated 30 August 2024).

Interest is capped, not fixed. For scheduled banks, including public sector, private, foreign and small finance banks, the rate must not exceed 1.5% per annum over the lender's external benchmark linked lending rate; for an NBFC or an NBFC-MFI the ceiling is 21% per annum (Skill Loan Scheme, model text updated 30 August 2024). The gap between those two ceilings is the single biggest cost decision a skilling borrower makes, because both rates are legitimate under the same scheme. The myScheme record prints the scheduled-bank cap as a single-digit spread, having lost the leading digit and the decimal point the model text carries, and the ministry's own annual report used that same fractional spread over the benchmark in force before it (MSDE Annual Report 2023-24). Read the model text as the correct one, and get the rate that will actually apply written into the sanction letter.

Repayment proper begins after the course ends. The moratorium runs six months from completion for a course of up to one year and twelve months from completion for a longer course, and servicing the interest through it is left to the trainee rather than required; doing so may earn a concession of 1% on the rate (Skill Loan Scheme, model text updated 30 August 2024). Instalments during the course are not ruled out either, though the model text caps what a lender may collect before the course is over.

The credit guarantee is the piece of the scheme the borrower never sees and should still understand. The National Credit Guarantee Trustee Company runs the Credit Guarantee Fund Scheme for Skill Development, and a registered lender pays a guarantee fee that cannot exceed 0.5% of the amount outstanding in return for cover against default; the model text tabulates that cover at 75% on loans of Rs 0.05 lakh to Rs 4.00 lakh and 70% on loans from Rs 4.00 lakh to Rs 7.50 lakh, and reserves the fund's right to modify it (Skill Loan Scheme, model text updated 30 August 2024).

Those cover figures carry different vintages, which is worth checking before relying on either. The ministry's Year End Review describes the cover on lower ticket loans as having been raised to 85% (MSDE Year End Review 2025), so a lender's own sanction terms are the ones that bind.

No interest subvention comes with this loan. The model text mentions simple interest during the study period only in the event that a central or state government provides a subsidy to a class of beneficiaries, which is a condition, not a benefit the scheme itself delivers. The concession of 1% for servicing interest through the study and moratorium period is the only relief written into the terms (Skill Loan Scheme, model text updated 30 August 2024).

• The maximum loan limit under the Scheme has been enhanced from ₹1,50,000 to ₹7,50,000.
• The minimum and maximum loan limit under the Scheme are ₹5,000 and ₹7,50,000 respectively.
• The loan is provided without any collateral security and/or third-party guarantee.
• Non-Banking Financial Companies (NBFCs) and Non-Banking Finance Company Micro Finance Institutions (NBFC-MFIs) have been included as eligible lending institutions in addition to Scheduled Banks under the Scheme.
• The interest rate charged by Member Lending Institutions should not be more than: 5% per annum over External Benchmark Lending Rate (EBLR) for Scheduled Banks.
• 21% per annum for NBFC/NBFC-MFIs.
• The Scheme provides guarantee cover to the extent of 70% to 75% of the amount in default.
• The claim payout to an eligible Lending Institution during the initial years is capped at 20% of the total disbursement made by the institution under the Scheme during a year.
• No processing fee is charged by Banks.
• Repayment Tenure: Amount of LoanTenureLoan up to ₹50,000Up to 3 yearsLoan between ₹50,000 to ₹1,00,000Up to 5 yearsLoan above ₹1,00,000Up to 7 years

What to prepare

Documents required

The paperwork is thin by design. Identity proof, address proof and proof of income of the trainee or the guardian where one exists are what the scheme record asks for, and the model text adds that an Aadhaar number counts as valid KYC alongside whatever identity and address proof the lender normally accepts (Skill Loan Scheme, model text updated 30 August 2024). State Bank of India asks for PAN where it does not already hold one, and calls for an asset and liability statement only on loans above the skill loan ceiling, which is to say never on a loan written under this scheme (SBI Skill Loan Scheme).

The one document people forget is the admission letter with the fee schedule from the training institute, because the lender pays that institute directly and cannot release money against an amount nobody has stated in writing.

Step by step

How to apply

There is no central application form for the scheme. The trainee applies to a lending institution that has registered with the National Credit Guarantee Trustee Company under the fund, and that registration is what makes a loan eligible for cover; NCGTC publishes the list of registered lenders on its scheme page.

That list is short. As on 31 August 2025 there were 31 registered lending institutions, among them 12 NBFCs and two private sector banks (MSDE Year End Review 2025). If a branch has not heard of the scheme, the practical move is to ask whether the institution is registered under the fund before filling anything in, because an unregistered lender can still give a loan but it will not be a skill loan under these terms.

The myScheme record carries an online application link for the scheme that points at a third-party portal rather than a ministry domain, and that portal did not load when it was checked for this page, though one failed connection is not proof it is down. Confirm the route with the lender before uploading documents anywhere.

Tracking an Application

The scheme text sets up no status page, no reference number and no central grievance route, which is a real weakness of a scheme run entirely through lenders. What exists is the lender's own service commitment: State Bank of India publishes a maximum disposal time of 6 working days after it receives a completed application with supporting documents, with the clock stopping for any period the applicant takes to supply information, and with at least 15 extra working days applying wherever the bank has to verify something with an outside authority (SBI Skill Loan Scheme). Ask the branch for that timeline in writing when the file goes in, and follow up against it rather than against a portal.

How winners are picked

Selection process

Nobody is selected. There is no merit list, no interview and no ranking against other applicants, because this is a credit appraisal and not an award. The lender checks the trainee's admission, the eligibility of the institute and the course, and its own view of repayment capacity, and then sanctions or declines.

One safeguard in the model text is worth knowing, because it is unusual. A training institute, or any entity with a significant stake in the training, cannot act as the lender's Bank Mitra, and a bank employee or a bona fide agency representative has to meet the trainee in person to explain the loan. The rule exists to keep institutes from selling loans for their own courses.

Fine print

Terms & conditions

Down payment is limited, not banned. A lender may take a nominal margin to keep the trainee serious, but the down payment, together with whatever the trainee pays as interest or instalments while the course is still running, cannot exceed 10% of the total course amount (Skill Loan Scheme, model text updated 30 August 2024). Practice varies widely inside that cap: State Bank of India shows margin as nil on its skill loan (SBI Skill Loan Scheme), while Central Bank of India sets margin at 5% on the same scheme (Cent Skill Loan).

Prepayment is free. The borrower can close the loan any time after repayment begins without a prepayment charge, and insurance is optional rather than bundled.

There is a protection most borrowers never hear about. If the trainee cannot finish the course because of an accident, death or disability, the lender can seek a pro-rata reimbursement of the unfinished part of the course fee from the training institute, which limits what the family is left repaying for training nobody received.

Get help

Contact

The lending branch is the only place that can answer an application question, since the ministry does not sanction, disburse or track individual loans. For a question about the guarantee, the fund is administered by the National Credit Guarantee Trustee Company from its registered office in Bandra Kurla Complex, Mumbai (NCGTC contact). For the scheme's own terms, the ministry's scheme page and the myScheme record are the two documents a branch is expected to recognise.

Source

Official links

Frequently asked questions

From the official scheme FAQ (myScheme)

Read this

Disclaimer

Disclaimer

Scheme details are compiled from myScheme, the Government of India’s official scheme-discovery platform, and are reproduced without alteration. Amounts, deadlines and eligibility change between cycles, so always confirm on the official links above before applying. Expertie does not process applications or charge fees.

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References

Sources