SBI to slash interest rates on education loans

The country’s largest lender SBI is likely to cut interest rates on education loans by up to 100 basis points (1 per cent), effective Monday.

When contacted the SBI Chairman, Mr Pratip Chaudhuri, said, “Please wait for a formal announcement”, while his Chief General Manager for personal banking, Mr Rajeev Mehra refused to either deny or confirm the development, saying he “will not talk official matters on a holiday”.

Meanwhile, according to sources in the know of the development, State Bank of India has decided to reduce interest rates on education loans by 25-100 bps across various maturities, after its Alco (asset, liability committee) met over the weekend.

Accordingly, for a loan of Rs 4 lakh, interest rate will be down by 25 bps to 11.75 per cent; for loans in the Rs 4-7.5 lakh range, the rate is down 100 bps to 12.50 per cent, while for loans above Rs 7.5 lakh, the rate is lower by 25 bps to 12.25 per cent.

SBI is also offering a concession of 50 bps on interest rates for loans given to female students.

“We may have an Alco meeting this week itself and it will have education loan rate cut on top of the agenda,” Mr Chaudhuri had said on February 13, while announcing the third quarter earnings. SBI had reported an unexpected 15.4 per cent spike in its standalone net income to Rs 3,263 crore.

After a sharp spike of nearly 3 percentage points in lending rates over the past two years, banks are reversing the trend to shore up their loan books, which have been steadily heading south, according to experts.

Mr Chaudhuri had, however, ruled out any possibility of a reduction in the base rate or home loan rates saying they are of long-term nature. SBI’s base rate stands at 10 per cent as of now, which is the lowest in the country.

“The possibility of (reduction) in home loans is less as the rate is 10.50 per cent and the base rate is 10 per cent. Hence, the possibility is less. Moreover, the tenor of a home loan is 25-30 years, (so) we have to think about it a lot,” Mr Chaudhuri had said.