One of the crucial elements of any loan is its repayment. The concern for repayment of the loan is from both the side, the borrower and the lender. Neither one wants the loan to default, but the circumstances sometimes make it almost impossible to recover the loan. In these cases, borrowers have to resort to harsh measures like selling the collateral, which keeps the borrower in a very tough spot. So, bankers realized the problem and came up with a solution that gives a sense of assurance to both the lender and borrower. Neither has to worry about the non-repayment of the loan.
SBI RiNn Raksha Policy is one such step by the country’s biggest lender that helps banks as well as the borrowers in case of default on loan in an unforeseen situation. So, a student loan helps realize the dream of studying at the world’s top university, and insurance coverage protects families and assets that are pledged as collateral in case of any untoward incident that may render the borrowers unable to pay.
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SBI RiNn Raksha Policy- A Saviour For Lender and Borrower
SBI RiNn Raksha is a credit insurance coverage for SBI overseas education loans. The insurance coverage takes care of the loan repayment, and the co-applicant doesn’t have to bear the consequence of any unforeseen event. SBI RiNn Raksha Policy is restricted to education loans, but itâ€™s also applicable on other loans. We will primarily focus on the abroad education loan and the credit insurance that comes with the SBI RiNn Raksha Policy.
One of the crucial aspects of the SBI RiNn Raksha Policy is that it takes care of all the outstanding amounts right from the time a borrower becomes unable to pay the loan in case of demise or accident that renders him incapable of making the repayment. The insurance scheme will pay any outstanding amount to the bank, and the co-applicant is freed from all the liability at that very instance.
Explaining The RiNn Raksha Policy
SBI gives insurance coverage for its abroad education loans, and it is activated by paying a one-time premium. Once a student takes the RiNn Raksha Policy, the lender and borrower both get assured of repayment. The insurance policy is used when the borrower is deceased or any unforeseen situation that makes the loan repayment impossible. Insurance coverage is a tool to empower the co-applicant by freeing them from any financial responsibility whatsoever. The insurer takes care of whatever the loan amount is left, and there is no upper limit, as the outstanding amount is the upper limit.
The RiNn Raksha Policy secures up to two borrowers from financial responsibility in case of non-repayment of loan due to an unforeseen situation. SBI gives the option of securing the co-applicants from the entire loan amount or their respective shares.
Some important terms related to RiNn Raksha Policy
|Policy Term||Payment of Premium|
|2 years – 30 years||Single-Premium|
|8 years – 30 years||Premium Payment Term- 5 years|
|15 years – 30 years||Premium Payment Term- 10 years|
What is Sum Assured?
The amount received by a family through its RiNn Raksha Policy is decided at the time of taking the loan. Sum of money which SBI assures is the outstanding loan amount which is a minimum of INR 10,000, and there is no upper cap, and it is fixed at the outstanding amount.
What is Premium?
The amount that is paid to start the insurance coverage and the payment can be made monthly, quarterly, half-yearly or yearly. The premium can be paid with a single premium or through a Premium Payment Term of 5 years or 10 years.
The moratorium is between 3 months to 72 months, and the policy term is from a minimum of 2 years to 30 years.
Perks of Choosing SBI RiNn Raksha Policy
Security of Collateral
When a student takes a loan for abroad education, they are concerned about the security of the assets. In case something untoward happens, and the co-applicant isn’t able to repay the loan. Then the collateral may get confiscated and sold. So, having financial security is the top aim of the insurance coverage scheme. However, SBI has tried not to limit it to a mere insurance scheme and has crafted the scheme to incorporate more benefits.
To encourage more students to take the insurance scheme, SBI has a provision of interest reduction for those opting for the SBI RiNn Raksha Policy. Loan applicants get a waiver of 0.5% on interest when they take SBI RiNn Raksha Policy. For loans with a value of several lakhs and sometimes even in crores, a 0.5% reduction can be a big differentiator for a borrower. The interest waiver is applicable only on the SBI Global Ed-Vantage Scheme and SBI Student loan schemes, the ones for abroad education loans. The interest rate without SBI RiNn Raksha Policy is 10.75% p.a. While the insurance scheme can bring down the interest rate to 10.25% p.a. And for female applicants an additional 0.5% p.a. so for a female, the effective interest rate will be 9.75% p.a.
The cost of education has seen an upward trend in the last decade. Still, with the availability of multiple channels of borrowing, the ease with which an education loan is available has brought a substantial change in the credit culture in India.
Income Tax Benefit
Since public sector bank loans make the borrower eligible to claim an exemption under section 80E of the income tax act. An additional insurance cover is icing on the cake. The insurance policy coupled with the tax claim exemptions can sum up into a considerable saving and helps students in saving a ton of money.
Availability of Choice for the repayment of cover term, premium paying term, and frequency of payment
SBI RiNn Raksha Policy gives a plethora of choices to the borrowers and makes it convenient for the borrowers to pay the premiums at their convenience. The premium paying terms can be of 5 years or 10 years. It also gives life insurance coverage apart from giving financial security to the collateral pledged to take the loan. In fact, the premium is also paid from the loan itself. So no actual payment has to be done at the time of taking the insurance. Thus it gives multi-layered protection without putting a financial burden on the borrowers.
SBI, through its RiNn Raksha Policy, has completely revamped the credit insurance system. It is indeed a borrower-friendly approach that helps them remain secured about the collateral they pledge. It has also saved banks from the rising menace of Non-Performing Assets or NPAs. Since public sector banks have seen a rise in the NPAs in the last few years. This step helps save the borrower and lender without anyone taking a direct financial toll, thus helping thousands of borrowers.