Banks to spare both new and existing education loans from rate hikes

Now students can plan for higher studies as almost all commercial banks including State Bank of India (SBI) and Punjab National Bank (PNB), have not increased interest rates on education loan on the existing as well as new.

Banks have taken this decision on finance ministry advice not to touch the interest rates for priority sector lending, particularly education, agriculture and housing, up to Rs 30 lakh. Most of the private sector lenders do not give education loan and the market is dominated by public sector banks.

The finance ministry senior official told ET, “Almost all the public sector banks have agreed to our suggestion of not raising interest rates for most of the sectors coming under priority sector lending including education loans. This will apply to existing as well as new loans”.

The matter was taken up in finance minister’s meeting with the chief executives of public sector banks earlier this month. All the banks have taken a unanimous decision of not hiking the rates of education loans. “One or two banks were having some objections which is also likely to be shorted out soon,” the official said.

Recently, after RBI hiked the rates in July, banks including SBI, PNB, Allahabad Bank and Bank of Baroda have raised their prime lending rates by 75 to 100 basis points and subsequently revised interest rates on sector-specific loans. But all of them did not touch the education loan. Besides this some of the banks chose not to touch the existing and new auto loans also. In case of new home loans, interest rates for amount up to Rs 30 lakh have been left untouched as it comes under priority sector lending.