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Army personnel are regarded with great respect by civilians. Their pay, however, is not very attractive. They stay away from family for most part of their service. Recognizing their sacrifice and contribution to the civilian safety, banking institutions offer special credit facility to army personnel with the perspective of realizing their dreams.
People who served in the Army, Navy and the Air Force have a tough time resurrecting their life after completing their service. Although, they secure pensions, subsidies and other perks, they are still in need of a source of income to continue to maintain the lifestyle. Often, they set out to start their own business. Banks offer customized loan products to this section of people. There are Government loan schemes which are aligned to these bank credit products which enable smooth credit flow to this section. The funding allows them to set up businesses and realize their dream of buying a home or providing education aid etc.
About Loans for Army Personnel
Under personal loan, there is a separate set of loans offered to individuals who are self- employed or in professions. The professions referred to are doctors, Government employees, defence and merchant Navy as served during their tenure in the camp. A host of nationalized banks offer personal loans.
For individuals who intend to set – up their own business after serving the National Army, these loans come in handy. These loans are offered with minimal or no collateral, the assets acquired with the funds are considered collateral in most cases. The loans offered to Army personnel have lower interest rate as against the loans offered to general civilians.
The savings made during the tenure of their service may not suffice to build their dream home, hence, home loans are extended to Army personnel with preferential interest rate and conducive terms of repayment.
Many financial emergencies may arise, during such times, instead of opting for personal loan, it is advisable to opt for loan against property. The property should, however, be in the name of the borrower.
Car loans are extended at specialized rates to Army personnel by various banks. These loans work exactly like the usual car loans. They adhere to a fixed EMI – schedule for repayment of loan. The tenure could range from 12 months to maximum of 7 years with some banks.
Some of the most popular funding schemes offered by banks are –
This is a home loan very popular among the Army personnel. This home loan scheme is exclusively for Army and Defence personnel of India. This loan will have lower interest rate than the conventional home loans offered by banks. There are other additional benefits available for these types of loans. The Army employees are also allowed easy repayment options and the tenure can be extended specifically for this category of applicants.
All permanent employees of defense forces are eligible. This is structured in the form of salary account held by the defence personnel. The minimum balance required is nil in the case of these accounts. Easy overdraft is available for these accounts. Concession is available on charges of locker. The overdraft facility is the credit received against the bank account. Free personal accident insurance cover of Rs. 10 Lakh in case of death. The bank also offers Jai Jawan Home Loan Scheme, under this scheme the processing fee are waived off. Incase of default due to death of the Army personnel during war, the outstanding loan amount upto Rs. 50 Lakh is waived off. The home loan is offered has preferential interest rate and flexible repayment schedule.
The AGIF helps defence personnel avail home loans. The key features of this home loan offered by HDFC Bank are – hassle free processing, customized repayment options, expert legal and technical counselling to help individual make the right home buying decision. Further, the home loan can be availed and serviced at any branch across India.
Personal loans are extended by most commercial scheduled banks at concessional interest rates to Army personnel. Andhra Bank extends the loans at interest rates of 11.7% much lower than the interest rate charged on the conventional personal loan extended to civilians. The processing fee is also minimal or waived off in personal loans offered by banks to defence personnel.
SBI offers education loan for candidates who wish to pursue higher studies at institutes associated with the Indian National Army. The 5 institutes identified are – Army College of Medical Sciences (ACMS), Army College of Dental Sciences (ACDS), Army Institute of Technology (AIT), Army Institute of Management (AIM), Army Institute of Law. The interest rate is preferential and is currently at 9.85% per annum, the maximum loan amount allowed under this scheme without collateral is fixed at Rs. 20 Lakh.
To enable ex-servicemen to resurrect their lives and build an income earning source, the Government introduced the Self – Employment Scheme For Ex-Servicemen (SEMFEX). This scheme has been promoted in collaboration with NABARD (National Bank for Agriculture and Rural Development). This scheme provides refinance to Banks for financing for development of agriculture and allied activities such as minor irrigation, mechanization of farm, cultivation of dairy, cultivation, poultry, fisheries etc. In this scheme, Soft Loan Assistance for Margin Money (SLA-MM) will be made available for all ex-servicemen borrowers irrespective of their rank and income to undertake self-employment pertaining to any sector and business. The maximum loan amount available is Rs. 10 Lakh. The scheme provides loans upto 95% of the estimated project cost. These schemes have 2 variants SEMFEX-II referred to as “From Arms to Farms” scheme which is discussed above. The other variant is SEMFEX-III scheme which is called “Sena Se Gramodyog” scheme. This helps rehabilitation of ex-servicemen and widows to undertake rural industries. The scheme operates in collaboration with Khadi and Village Industries Commission. This scheme provides subsidy to the extent of 30% of project cost for projects estimated upto Rs. 10 Lakh and for those upto Rs. 25 Lakhs, the rate of margin money grant is 30% upto Rs. 10 Lakh and 10% for the balance estimated cost.
Bank’s customized products and Government initiatives have ensured that there is enough access to credit. These schemes are primarily aimed to provide opportunity for resurrecting a regular income after service with the Indian National Army. The schemes also help widows of servicemen to find employment.
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