Mumbai: The country's largest lender SBI is likely to cut interest rates on education loans by up to 100 basis points (1 per cent), effective Monday.
When contacted SBI Chairman Pratip Chaudhuri said, "Please wait for a formal announcement", while his chief general manager for personal banking, Rajeev Mehra refused to either deny or confirm the development, saying he "will not talk official matters on a holiday."
Meanwhile, according to sources in the know of the development, the State Bank of India has decided to reduce interest rates on education loans by 25-100 bps across various maturities, after its Alco (asset, liability committee) met over the weekend.
Accordingly, for a loan of Rs 4 lakh, interest rate will be down by 25 bps to 11.75 per cent; for loans in the Rs 4-7.5 lakh range, the rate is down 100 bps to 12.50 per cent, while for loans above Rs 7.5 lakh, the rate is lower by 25 bps to 12.25 per cent.
SBI is also offering a concession of 50 bps on interest rates for loans given to female students.
"We may have an Alco meeting this week itself and it will have education loan rate cut on top of the agenda," Chaudhuri had said on February 13, while announcing the third quarter earnings. SBI had reported an unexpected 15.4 per cent spike in its standalone net income to Rs 3,263 crore.
After a sharp spike of nearly 3 percentage points in lending rates over the past two years, banks are reversing the trend to shore up their loan books, which have been steadily heading south, according to experts.
Chaudhuri had, however, ruled out any possibility of a reduction in the base rate or home loan rates saying they are of long-term nature. SBI's base rate stands at 10 per cent as of now, which is the lowest in the country.
"The possibility of (reduction) in home loans is less as the rate is 10.50 per cent and the base rate is 10 per cent. 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 had said.

The education loan book of SBI constitutes under 7 percent of its Rs 1.75 lakh crore retail loan portfolio. In the December quarter, the bank saw its education loan books swelling by 14.17 per cent.
Meanwhile, over the weekend, two smaller state-owned banks have announced slashing interest rates on home loans by 25 bps.
Central Bank of India (CBI) brought down the interest by 25 bps to boost credit demand. Accordingly loans up to 25 years and under Rs 30 lakh will be available at a reduced interest rate of 10.75 per cent from CBI.
The Pune-headquartered Bank of Maharashtra (BoM), too, announced a similar reduction in its housing loans under Rs 25 lakh up for a five-year tenor at their reduced base rate of
10.60 per cent.
Both the banks have also waived of processing fees on home loans. While CBI is offering a blanket waiver of its processing fees for loans across amounts and tenors till March 31, BoM has done so only for applications under Rs 25 lakh. BoM used to charge up to Rs 12,500 for such loans.
High inflation and the ensuing jacking-up of interest rates by RBI -- which hiked policy rates a record 13 times in the 19-month period up to last October, coupled with the uncertainties on the economic growth, is widely seen to have dented demand for housing loans.
As monetary actions get transmitted, the loan servicing costs also move northward, keeping prospective borrowers off and also result in stress on existing portfolios.
According to the Reserve Bank's Financial Stability Report released on January 12, the housing credit growth fell to a poor 2.3 percent from 10.7 percent year ago.
"In response to the rise in housing prices and interest cost, the deceleration in housing credit was more significant," the report had said.