Tuesday, February 28, 2012

SBI cuts education loan rates by up to 100 bps

The country’s largest lender, State Bank of India (SBI), on Monday cut interest rates on education loans by up to 100 basis points. “To extend financial assistance to students pursuing higher education in India and abroad, at affordable rate, the bank has reduced rates for loans up to Rs. 10 lakh (Rs. 1 million) for studies in India and up to Rs. 20 lakhs (Rs. 2 million) for studies abroad effective from today,” SBI said in a release.

While the Reserve Bank of India (RBI) left policy rates untouched at its last meeting, banks have been trimming lending rates on specific products to attract borrowers. Education loans are a part of SBI's long-term strategy to woo youngsters. The idea is to lend to the youth and, later, sell them other products.

A 25-bps rate cut was introduced for education loans of up to Rs. 400,000 and above Rs. 750,000. The new rates for these loans would be 13.5% and 12%, respectively. For loans between Rs. 400,00 and Rs. 750,000, the interest rate has been reduced by 100 bps to 13.25%. The base rate of the bank is 10%. Under the SBI scholar loan scheme, the bank extend loans to students joining elite institutions like IIMs/IITs/NITs. At present, 111 institutes are covered under this scheme and loans up to Rs. 1.5 million are given, said the bank.

“Loans are sanctioned without any security, except parent or guardian as co-borrower. The rate of interest under this scheme has also been reduced by 25-bps. Thus, the new rate of interest is 200 bps above the base rate,” it said. In addition, the bank provides 0.50% additional concession for girl students and 1% concession for the entire tenure of loan, if the full interest is serviced during the moratorium period, including the course duration.

Source: The Financial Express, February 28, 2012

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