Much like several other loan categories, education loan rates have been heading southwards since last year. As the Reserve Bank of India (RBI) slashed repo rates by 115 basis points cumulatively in March and May last year, interest rates nose-dived across loan categories, particularly home loans.
Public sector banks offer lowest rates
Given that average Indian families spend nearly one-third of their annual incomes on kids’ higher education, the education financing options are as important as home loans. Pandemic or not, cost of higher education – be it in India or abroad – is only go up. Data shows that the number of Indian students obtaining education loans has grown from 2.98 lakh in 2016-17 to 3.09 lakh in 2019-20.
Expectedly, public sector banks are leaders in this space, disbursing over 70 percent of total education loans, followed by non-banking financial companies. This includes dedicated education loan companies such as HDFC’s subsidiary Credila and Avanse. Public sector banks also offer the cheapest loans, with rates starting at as low as 6.8 percent for a Rs 20-lakh loan with a tenure of seven years. State Bank of India’s (SBI) rates have dropped marginally by 5 basis points over the last two months.
A note about the tableInterest rate on education loan for all listed (BSE) public & Pvt Banks considered for data compilation. Banks for which data is not available on their websites, are not considered. Data collected from respective banks’ websites as on 11 Mar 2021. Banks are listed in ascending order on the basis of interest rate i.e. bank offering lowest interest rate on education loan (loan amount up to Rs 20 lakh) is placed at top and highest at the bottom. Lowest rate offered by the banks on loan up to Rs 20 Lac is considered in the table. EMI is calculated on the basis of interest rate mentioned in the table for Rs 20-lakh loan with tenure of seven years (processing and other charges are assumed to be zero for EMI calculation).