Finally State Bank of India (SBI), the country’s largest lender has taken action on its plan of reducing interest rates on education loan. SBI has reduced interest rates on education loans for new borrowers. Bank has reduced the rates in the range of 25-200 basis points (1 bp=1/100th of a percentage point). The new rates will be applicable from May 1 to September. Hence after the cut the education loans will be available in the range of 11-11.5%.
Thus on loans up to 4 lakh the rate will be 11.50% against the earlier 11.75%, on loans between Rs 4 lakh and Rs 7.5 lakh the interest charged will be 11.25% against 13.25% earlier, whereas for the loans above Rs 7.5 lakh the interest rate will be 11% against 12.25%.
For female students availing educational loan SBI offers concessional rate of 0.5%. SBI’s educational loan portfolio amounts in the range of Rs 5,000-6,000 crore.
As the new rates are applicable for the new borrowers so the existing customers will not get the benefit of the new rates as the rates they are paying are linked to SBI’s prime lending rate. And the PLR has not been reduced since January last year. The bank’s PLR is at 12.25% even though this year most banks have reduced their PLRs.
Punjab National Bank, PSU lender is offering 11% on education loans below Rs 4 lakh, and 11.75% on loans above Rs 4 lakh another lender Bank of India is charging 10% on loans up to Rs 4 lakh and 10.5% up to Rs 7.5 lakh.
BoI on loans above Rs 7.5 lakh, is charging 11.25%. According to Bank analysts SBI is offering education loans at sub-PLR, rather than cutting its PLR. Besides from education loans, SBI is offering home and auto loans and produce marketing loans for the agri sector at sub-PLR levels.
