Gen. Rawat said the two educational institutions will be developed on the lines of Delhi's Sanskriti school. One school will be built in Pathankot and the other will come up either in Bhopal or Secunderabad.
It may take 3 to 4 years for the schools to become operational.
Till then the Army will take care of the financial need of children of martyrs or those disabled in action, if government does not provide them funds, Gen. Rawat said.
After graduating from the two boarding schools, the students can study in the Army-run colleges.
He said the government put a cap on the educational assistance as some people were misusing the scheme.
"Somehow, some people among us started misusing the scheme... We told the government that we will review the policy so that only genuine people can benefit from it," he said.
Under the scheme, rolled out in 1972, tuition fee of children of martyrs or those disabled in action were completely waived in schools, colleges and other professional educational institutions.
However, the government had on July 1 issued an order capping the amount at Rs 10,000 per month, triggering discontentment among all the three services.
The Chiefs of Staff Committee (CoSC) had written to the defence ministry requesting it to remove the cap.
However, the government last week made it clear that it would not review the decision.
Around 250 students have reportedly been affected by the government's decision.
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