The State Bank of India (SBI) on Tuesday decided to cut interest rates on educational loans from 25-200 basis points (bps) those will be sanctioned to students from May 2009 to Sept 2009.
Releasing a statement, the largest lender of India on April 28 said that bank has reduced 25 basis points interest rate from 11.75% to 11.50% on up to Rs 4 lakh loans, 200 bps (2%) on above Rs 4 lakh to Rs 7.5 lakh and 125 bps (1.25%) on above Rs 7.50 lakh.
The girl students will get an extra concession of 50 bps (0.50%) on each range of educational loans.
The new loans will be applicable only for new applications while there will be no change in the rates of existing loans, specified the bank.
Bank has also announced to increase the education loan limit from Rs 7.50 lakh to Rs 10.00 lakh for educating in India, and from Rs 15 lakh to Rs 20 lakh for educating abroad.
SBI also stated that the loan rates would be linked to prime lending rates (PLR) that means a reduction in PLR would reduce the interest rate while rise in the PLR would also raise the loan rate.
However, this time, the bank has offered a special discount to loan borrowers by giving one percentage point lower the interest rate to PLR as against the earlier case. It means the benefit of lower interest rate on new loans would continue to whole loan tenure not just a limited period.
Educational loan is a special type of loan which is given to students to conduct their higher education without any obstacle. The banks finance students directly by sending the Demand Draft of the course fee and other expenses while during moratorium period banks charge simple interest rate to the borrowers instead of compound. A repayment period of 5-7 years is given after the moratorium.
For the loan amount up to Rs 4,00,000, SBI does not ask for any third party guarantee or security while for above credit, bank seeks third party guarantee or other collateral.
SBI has so far assisted 3,56,000 students. It has sanctioned loan limits aggregating Rs 2,653 crore in FY2009.
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