The country’s largest public sector bank, State Bank of India, has decided to reduce interest rates on educational loans. This move is of penultimate importance to the students as the bank is one of the leaders in the education loans segment.
The bank has divided the education loans into 3 slabs: Loans under 4 lakh, over 7.50 laks and between 4 and 7.50 lakh. Accordingly, the new rates for loan amounts less than Rs. 4 lakh have been reduced from 12.25% to 11.75%. Rates for loan amounts above Rs. 7.50 lakh have fallen to 12.25%, a decrease of 1 percent. However, interest rates for amounts between Rs. 4 lakh and Rs. 7.50 lakh have remained unchanged and still stand at 13.25%.
There is an expectation that other banks may follow the same trend.
Speaking on this development, M.P. Murugan, assistant general manager, Allahabad Bank said, “We are the leader in the educational loan space. We already have special lower interest rates for IIT and IIM students, at 11.25%. However, if the need arises, we may look into reducing our rates as well.”
His views were echoed by N.R. Shet, general manager, Corporation Bank who said, “We do not have immediate plans to reduce educational loan rates, but you cannot rule out the possibility of us doing so. Our rates are not that high, so we will wait and watch.”
This is very good news for students, right before the start of a new academic year for graduates and under graduates. This also corresponds to the time when most students leave for their studies abroad. Expressing delight over the news, Hsoc Matthai, 17, a student from Mumbai, says: “Educational loans are necessary. My brother and I are planning to go for professional courses this year. Even a small decrease in interest rates makes a lot of difference. We would rather go to a bank that offers lower rates.”
State Bank of India (SBI) which started in 1955 is India's largest commercial bank today. It has a vast domestic network of over 9000 branches (approximately 14% of all bank branches) and commands one-fifth of deposits and loans of all scheduled commercial banks in India.