SBI mulls reduction in education loan rates by 0.25%

India's largest lender, State Bank of India (SBI), is planning to slash lending rates for education loans by 0.25 per cent as early as this week. SBI plans to announce the rate cut early this week, enabling students who take loans from May 1 to September 30, avail the benefit of reduced rates, an SBI official said.

"The idea is to help students aspiring for higher studies with adequate financial support. Interest rates on all category of education loans are likely to come down by 0.25 per cent. The scheme will be applicable for all education loans approved during May-September, 2009," the official said.

SBI currently offers education loans for rates ranging from 11.75 per cent to 13.25 per cent. Female students can avail loans for a 0.5 per cent less rate across all categories.

While education loans up to Rs four lakh do not require any collateral security, those between Rs 4 lakh and Rs 7.5 lakh would require a third party guarantee.

For loans above Rs 7.5 lakh and up to Rs 20 lakh, borrowers will have to produce some tangible assets such as a house or land as security. The loan re-payment period ranges from five to seven years.

SBI has an education loan portfolio of Rs 6,600 crore and has seen its portfolio growing by around 50 per cent in the past one year, the official said.

"We had targeted a growth (in education loans) of 35 per cent in FY '09 but has far exceeded that target on account of a good demand," the official said.
 The bank gives loans up to Rs 10 lakh for studies in India and up to Rs 20 lakh for courses abroad.
    
"The economic downturn did not have any impact on this segment. Infact we have received more loan enquiries in the past few months. The demand for education loans is likely to go up in the months ahead," the official said.
   
SBI has recently slashed rates in various categories such as SME, vehicle and home loans with a view to improve the credit flow to the market.