SBI cuts rates on study loans

Last Updated: Tue, Feb 28, 2012 11:46 hrs

India's largest lender, the State Bank of India (SBI), on Monday announced 25-100-basis point (bps) reduction in interest rates charged on educational loans.

The bank is now offering educational loans of up to Rs 4 lakh at 13.5 per cent, between Rs 4 lakh and Rs 7.5 lakh at 13.25 per cent and above Rs 7.5 lakh at 12 per cent. SBI said loans of up to Rs 15 lakh would be given at 12 per cent under a scholar scheme that covers 111 elite institutes across the country.

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The lender said girl students could avail of 0.50 per cent concession. Also, concession of one per cent would be given for the entire tenure of the loan, if full interest is serviced during the moratorium period, including the course duration.

Earlier this month, SBI chairman Pratip Chaudhuri indicated the bank would look at cutting rates in this category. As on December 30, the education portfolio accounted for seven per cent of the total retail loan book. While Union Bank of India and Bank of Maharashtra have cut their base rates by 10 bps each, SBI is the first lender to cut the spreads between the floor rate and the interest rate charged.

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However, given the tight liquidity conditions, other banks are not in a hurry to lower their lending rates. "The cut of 50 bps in cash reserve ratio has certainly helped. However, liquidity still remains tight and above the comfort level of the Reserve Bank of India. Interest rates have not really come off. Till the cost of borrowing comes off, it is difficult to cut rates," said Shikha Sharma, MD & CEO, Axis Bank.

The top official of a public sector bank said it would consider revising rates if those offered by the SBI are lower. With the new interest rates effective from on Monday, SBI is one of the banks offering study loans at lower rates.

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Despite infusion of Rs 32,000 crore via 50 bps cut in cash reserve ratio in January, liquidity deficit continues to stay at Rs 1.2 lakh crore. "High cost of funds has become a cause for concern, especially when we are nearing the financial year-end," said a senior public sector banker.

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