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RBI Cuts Down on Repo Rate and it Might Affect your Education Loan for Good.

RBI Cuts Down on Repo Rate and it Might Affect your Education Loan for Good.

Last Modified : April 15, 2019

This calendar year is surely going to be one hell of a year for the banking sector. Recent news making round is that RBI has yet again announced to cut down on its repo rate by 25 base points (0.25%) for commercial banks. In a single calendar year, this is, so far, the second reduction by RBI. This cut down will further help banks to have more room to extend loans on lower lending rate.

What is Repo Rate?

Repo Rate is the percent at which RBI lends money to commercial banks in case of shortfall of funds.

This new change came along with the Monetary Policy Statement, this will be the last statement before General Elections’ 2019. The benchmark lending rate has been reduced to 6.00% from 6.25%.

How does it affect Education Loans?

RBI’s new change affects the repo rate at which the bank lends money to commercial banks. Hence, due to this recent reduction, students get benefited as commercial banks gain enough room to decrease their lending rate resulting in the reduction of Interest rates.

The average rate of interest charged for Education Loan in India and Abroad ranges from 8 to 15% depending on the amount of loan. Hence, effective from now, this rate of interest might see a bit of relaxation.

Education Loan helps students to pursue higher education in both India and Abroad and Rate of Interest plays a key role in students selecting the bank they would like to sanction the loan from. Below mentioned are some of the top banks and the interest rate they charge for Education Loan:

Name of BankPrevious Rate of Interest per AnnumRevised Rate of Interest per Annum
State Bank of IndiaUp to 7.5 Lacs- 10.55% Above 7.5 Lacs- 10.80%Up to 7.5 Lacs- 10.50% Above 7.5 Lacs- 10.80%
Allahabad BankUp to 4 Lacs- 11.45% Up to 7.5 Lacs- 11.45% Above 7.5 Lacs- 10.95%Up to 4 Lacs- 11.35% Up to 7.5 Lacs- 11.35% Above 7.5 Lacs- 10.85%
Axis BankUp to 4 Lacs- 15.20% Up to 7.5 Lacs- 14.70% Above 7.5 Lacs- 13.70%-
HDFC Credila12.10%+ floating rate(depends on the risks points of the applicant)11.60%+ floating rate(depends on the risks points of the applicant)
Punjab National Bank (PNB)Up to 7.5 Lacs- 11.25% Above 7.5 Lacs- 11.85% for education at premier foreign universities- 9.85%Up to 7.5 Lacs- 11.15% Above 7.5 Lacs- 11.75% for education at premier foreign universities- 9.75%
IDBI BankUp to 10 Lacs-9.85% Above 10 Lacs-10.45%-
Indian Overseas Bank (IOB)Up to 7.5 Lacs- 10.70% Above 7.5 Lacs- 11.70%Up to 7.5 Lacs- 10.65% Above 7.5 Lacs- 11.65%
Avanse Financial Services11.5%+ floating rate(depends on the risks points of the applicant)-
Syndicate BankUp to 4 Lacs- 11.00% Up to 7.5 Lacs- 11.25% Above 7.5 Lacs- 12.25%Up to 4 Lacs- 10.25% Up to 7.5 Lacs- 10.50% Above 7.5 Lacs- 11.50%
Canara BankUp to 4 Lacs- 10.70% Up to 7.5 Lacs- 10.70% Above 7.5 Lacs- 10.50%Up to 4 Lacs- 10.65% Up to 7.5 Lacs- 10.65% Above 7.5 Lacs- 10.45%

Now that RBI has announced of reducing repo rate, this is one factor added to the list of benefits of Education Loan. While you wonder that Education Loan may bind you in years to come, it also holds some imperative benefits that would make you consider it.

Benefits of Education Loan

We might be reluctant to exhaust all our savings for education when instead, we can keep those savings intact and let banks pay for our studies

Few of these benefits are listed below:

  • Your savings are your investments, use it wisely. Do not exhaust your existing finances.

  • Banks can customize an education loan plan to suit your budget and requirements, facilitating you to save

  • Investments made are for your future needs like your child’s marriage, your own retirement, and other financial goals. Keep them invested for them instead of cashing them for the education loan

  • Due to high competition, Banks keep attractive Interest Rates and flexible terms of repayment

  • Easy disbursal of Loan. Banks these days are quite prompt in carrying out loan procedure

  • Tax Benefit under Section 80E of the Income Tax Act, 1961 is implied on the interest of education loan EMI as a deduction.