Students cheer! SBI planning to cut interest rate on education loans

Mumbai: Banking major SBI today hinted at a possible cut in lending rates in the education loan segment, though it is is unlikely to reduce its base rate for now.

“We have an Alco (asset, liability committee) meeting this week itself and it will have education loan rate cut on top of the agenda,” Chairman Pratip Chaudhuri said here.

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Interest rates on education loans at present range from 12.25 percent to 14.50 percent, depending upon the quantum and the duration of the loan.

Chaudhuri, however, said the possibility of a reduction in base rate at this point of time looks bleak as the bank has absorbed last three policy rates hike without raising its base rate. The lender’s base rate stands at 10 percent as of now, which is the lowest in the country, Chaudhuri said.

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Giving the rationale behind any possible rate cuts, he said reduction in interest rate will be determined in case of competition from other banks or if the credit pick-up is slow.

About possible slashing of home loan rates, he said the possibility was less.

“The possibility of (reduction) in home loans is less as the rate is 10.50 percent and the base rate is 10 percent. 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,”

Chaudhuri said.

He, however, said in case of further CRR cut by the central bank, the entire rate structure will come down. On 24 January, the Reserve Bank had reduced the cash reserve ratio (CRR) by 0.5 percent to 5.5 percent to infuse liquidity into the system, indicating a reversal in policy rates in future.

PTI