The largest lender, State Bank of India (SBI) that was expected to cut the interest rates of education loans within this week have announced 25-200 basis points in their education loan rates.
Interest rates for loans up to Rs 4 lakh have been slashed by 25 basis points to 11.5% from 11.75% where as for loans between Rs 4 lakh and Rs 7.5 lakh, the rate has come down to 11.25% against 13.25% earlier. Interest rate for loans above Rs 7.5 lakh has been fixed at 11% against 12.25%.
Further SBI will offer 50 basis points concession on these rates to the female students.
However the rate cut is only applicable for the new borrowers taking loans between May and September. The existing borrowers continue to pay the old rate because the rates that they pay are PLR linked and the PLR of the bank remain unchanged at 12.25%.
SBI extends loans up to Rs 10 lakhs for studies in India and Rs 20 lakhs for studying abroad. During the moratorium period, the bank charges simple interest rate at 1% concession. A repayment period of 5-7 years is given after the moratorium.
Loans up to Rs 4 lakhs are offered without a collateral requirement while a third party guarantee or other collateral is required for loan amount higher than Rs 4 lakh.
Following the rate cut, education loan rates of the bank lie in the range of 11-11.5%. SBI's education loan portfolio is in the range of Rs 5,000-6,000 crore. The bank has so far assisted around 3,56,000 students.
During the last fiscal, SBI sanctioned loan limits aggregating to Rs 2,653 crore.