Tag: interest rates

Should you go for HDFC Green deposits, SBI Platinum deposits?

Personal Finance

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Last week, housing finance company, HDFC and the country’s largest bank, SBI launched new fixed deposits. While the HDFC Green & Sustainable Deposit is targeted at those motivated by the ESG (environmental, social, and governance) theme, the appeal of SBI’s Platinum Deposit Scheme lies in the slightly higher rates compared to the bank’s existing deposit rates.

That said, these deposits don’t seem attractive, across both short (i.e. less than one year) and long tenures. There are many other higher-return fixed deposit options, both from banks and non-banking financial companies (NBFCs) that investors can consider. With interest rates expected to move up, though not any time this year, investors can go for 1–2-year deposits (and not very long-tenure ones) to benefit from a potential rate hike.

SBI Platinum doesn’t shine

The scheme comes with three tenure options – 75 days (2.5 months), 525 days (around 1.5 years) and 2250 days (6 years and 3 months) with respective interest rates of 3.95 per cent, 5.10 per cent and 5.55 per cent for under ₹2 crore deposits. These rates are 0.05 to 0.15 percentage points higher than those offered on SBI’s existing deposits of such tenures.

Senior citizens get 4.45 per cent and 5.60 per cent on the Platinum 75 days and 525 days deposit respectively. Platinum 2250 days deposit offers 6.20 per cent (rate applicable on the SBI WECARE Scheme), an extra 0.65 per cent for senior citizens. The Platinum deposit scheme is open for investment until 14 September 2021.

Deposits from the Post Office and many public sector banks are a good alternative to SBI Platinum deposits. The ultra-safe Post Office 1-year and 2-year time deposits (interest paid annually, calculated quarterly) offer 5.5 per cent per annum.

This is better than the 5.10 per cent offered to non-senior citizens on SBI’s platinum 525 days deposit.

Many other public sector banks too offer 5.10 -5.20 per cent on their 1-2-year deposits. SBI’s 5.6 per cent for senior citizens is a tad better than the 5.50 per cent on Post Office deposits but is similar (5.60 – 5.70) to that on many public sector bank deposits.

HDFC green deposits flash amber

HDFC’s Green & Sustainable Deposit (Green Deposit) is for those enthused by the popular ESG theme. Money mobilised through these deposits will be used to fund projects supporting the UN’s sustainable development goals. These deposits have tenures ranging from 33 to 120 months and interest rates from 5.75 to 6.55 per cent per annum on deposits of up to ₹2 crore. Deposits of up to ₹50 lakh will get 0.10 per cent more if booked online. They come with monthly, quarterly, half-yearly and annual pay-outs, and a cumulative option. The deposits have the highest ratings of FAAA/Stable by CRISIL and MAAA(stable) by ICRA.

While there are a few ESG-themed equity MFs in India, there are no such debt funds. We compare HDFC’s Green Deposit with other regular FDs from NBFCs. Unlike bank deposits, NBFC deposits are not protected under DICGC’s insurance cover of up to ₹5 lakh (principal and interest). From a safety perspective, it’s best to invest only in AAA-rated NBFC deposits.

Purely based on returns, other AAA-rated NBFC deposits offer a better deal compared to HDFC’s Green Deposits. Also, minimum tenure for Green Deposits is as high as 33 months. Other regular NBFC deposits, with 1-year and 2-year tenures, may be more suitable given low interest rate scenario.

Given that the minimum tenure of 33 months itself is on the higher side, we restrict our comparison with peers to only this tenure. Even here, green deposits don’t score. The 33-month Green Deposit offers rates from 5.90 to 6.10 per cent per annum on the non-cumulative options and 6.10 per cent per annum on the cumulative option.

But HDFC’s 33-month regular deposit offers 0.10 per cent higher on each of the respective options. That is, 6.0 per cent for the monthly, 6.05 per cent for quarterly and 6.10 per cent for half-yearly pay-out option, and 6.20 per cent both for annual pay-out and cumulative option. HDFC’s regular deposit rates are a tad better than those of the financially strong Bajaj Finance’s AAA-rated deposits rates as well. Senior citizens get 0.25 per cent more per annum on all these deposits.

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Here are the top 5 bank fixed deposit interest rates, BFSI News, ET BFSI

Banking & Finance

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The fixed deposit (FD) is one of the most popular investment avenues. Many investors prefer bank FDs over equities as the former are considered safe. The return earned from a bank FD is fixed and known at the time of investing unlike in case of equity.

Fixed deposits are also known as term deposits. This is because money is deposited with a bank for a fixed predetermined time period or term. Here are certain things that you must know while opening an FD account.

You can open a term deposit account with a bank where one already has a savings account. Some banks may allow you to open an FD account without having to open a savings bank account. However, you will be required to undergo a know-your-customer (KYC) process in case the bank allows you to place an FD without a savings account. You will be asked to provide self-attested photocopies of ID proof such as PAN, address proof such as Aadhaar, Voter ID card, passport etc. and coloured passport size photographs. You will be required to show the original documents which will be returned immediately post-verification.

  • Minimum and maximum investment amount

The minimum amount needed to open a fixed deposit account varies from bank to bank. However, there is no limit on the maximum amount which one can invest in an FD.The minimum and maximum tenure offered for which an FD can be placed varies from one bank to another. Usually, one can invest in FD for a minimum period of 7 days and for a maximum of 10 years. You can choose the period for which you wish to keep your FD as per your requirement.

Top 5 bank fixed deposit interest rates
Tenure: 1 year

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.10 10624.10
Indusind Bank 6.00 10613.64
DCB Bank 5.55 10566.66
Bandhan Bank 5.50 10561.45
IDFC First Bank 5.50 10561.45

Tenure: 2 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.10 11287.14
Indusind Bank 6.00 11264.93
Axis Bank 5.50 11154.42
Bandhan Bank 5.50 11154.42
DCB Bank 5.50 11154.42

Tenure: 3 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.30 12062.63
Indusind Bank 6.00 11956.18
DCB Bank 5.95 11938.52
IDFC First Bank 5.75 11868.13
Karnataka Bank 5.50 11780.68

Tenure: 5 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.50 13804.20
IDFC First Bank 6.00 13468.55
Indusind Bank 6.00 13468.55
DCB Bank 5.95 13435.42
Axis Bank 5.75 13303.65

All data sourced from Economic Times Intelligence Group (ETIG)
Data as on August 20, 2021The interest rate offered on fixed deposits (FDs) will depend on the period for which you are investing in the FD and also vary from bank to bank for FDs for the same tenure. Senior citizens are typically offered higher interest rates. To receive the interest payment, you can choose either cumulative option or non-cumulative option.

Under the cumulative option, interest accrued on the deposit is reinvested and paid at the time of maturity along with principal amount.

In the non-cumulative option, interest is credited into the depositors account at the pay-out interval chosen at the time of placing the FD. Generally, one can choose from the options of receiving the interest on monthly, quarterly, half-yearly or annually basis as offered by the bank.

Interest received on FD is fully taxable in the hands of the investor. It will be taxed at the rates applicable to your income tax slabs. TDS will be deducted by the bank if the interest payment in a single financial year exceeds Rs 10,000, as per current tax laws. To avoid TDS, one can submit Form 15G or Form 15H (as applicable) to the bank.In case of any urgent requirements, one can break his/her FD before the maturity date. A penalty may be levied by the bank on premature withdrawals. The penalty amount varies from one bank to another.

While placing a FD, one must check the rules regarding pre-mature withdrawals. Sometimes, banks offer FDs without premature withdrawal facility as well as FDs without penalty on premature withdrawal.

One can use FD as a collateral to obtain a loan. The maximum loan sanctioned is usually a certain percentage of the principal deposit. This percentage may vary bank to bank.Nomination facility for Fixed Deposits (FDs) is also available.At maturity, if no specific instructions are given, most banks automatically renew the FD for the same period for which it was initially placed at the interest rates prevailing on the date the FD matures. If you do not want automatic renewal of your FD, you need to choose this option on the account opening form.

If you have forgotten to mention it, then you can visit the bank branch on the day of maturity and ask them to credit the proceeds into your savings account.

Nowadays banks offer the facility of opening an FD account online via Net banking through your account. One can invest in FD without having to visit a branch physically. However, remember that your bank may not issue you a printed FD receipt/advice if invested online.

Disclaimer: The data/information given above is subject to change therefore before taking any decision based on it, contact the bank/institution concerned.



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MPC voted to give growth a chance to claw back into the sunlight: RBI Bulletin

Banking & Finance

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The Monetary Policy Committee (MPC) voted to give growth a chance to claw its way back into the sunlight, according to an article in the Reserve Bank of India’s latest monthly bulletin.

The MPC’s decision — to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4 per cent and continue with the accommodative stance — is backed by all available evidence – mobility-, activity- and survey-based, according to the article ‘State of the Economy’.

 

“Yet it is, in the ultimate analysis, a judgement call because at the heart of the association between growth and inflation, a sacrifice is embedded,” according to the article put together by 23 RBI officials, including Deputy Governor MD Patra.

The authors observed that a reduction in the rate of inflation can only be achieved by a reduction in growth; an increase in growth is only possible by paying the price of an increase in inflation, always and everywhere.

 

“Called the sacrifice ratio in economics, the latest estimates for India suggest that for a one percentage point reduction in the rate of inflation, 1.5-2 percentage points of GDP growth have to be foregone,” assessed the authors.

The authors posed the question: “But what if the MPC doggedly attacks the supply shock induced price pressures in spite of the current state of the pandemic-ravaged economy and as a consequence, economic activity wilts into depression?”

The authors emphasised that no amount of humility will wipe away the tears then.

“Also, our MPC is India-focused; it has to be. It must choose what is right for India, emulating none, not emerging nor advanced peer,” they added.

The article noted that so far, inflation is on track to staying within the trajectory envisaged (average 5.7 per cent in FY22) and it is likely to stabilise during the rest of the year.

“In our view, this is a credible forward-looking mission statement for the path of inflation,” the authors said.

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Here are the top 5 bank fixed deposit interest rates, BFSI News, ET BFSI

Banking & Finance

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The fixed deposit (FD) is one of the most popular investment avenues. Many investors prefer bank FDs over equities as the former are considered safe. The return earned from a bank FD is fixed and known at the time of investing unlike in case of equity.

Fixed deposits are also known as term deposits. This is because money is deposited with a bank for a fixed predetermined time period or term. Here are certain things that you must know while opening an FD account.

You can open a term deposit account with a bank where one already has a savings account. Some banks may allow you to open an FD account without having to open a savings bank account. However, you will be required to undergo a know-your-customer (KYC) process in case the bank allows you to place an FD without a savings account. You will be asked to provide self-attested photocopies of ID proof such as PAN, address proof such as Aadhaar, Voter ID card, passport etc. and coloured passport size photographs. You will be required to show the original documents which will be returned immediately post-verification.

  • Minimum and maximum investment amount

The minimum amount needed to open a fixed deposit account varies from bank to bank. However, there is no limit on the maximum amount which one can invest in an FD.The minimum and maximum tenure offered for which an FD can be placed varies from one bank to another. Usually, one can invest in FD for a minimum period of 7 days and for a maximum of 10 years. You can choose the period for which you wish to keep your FD as per your requirement.

Top 5 bank fixed deposit interest rates
Tenure: 1 year

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.10 10624.10
DCB Bank 6.00 10613.64
Indusind Bank 6.00 10613.64
Bandhan Bank 5.50 10561.45
IDFC First Bank 5.50 10561.45

Tenure: 2 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
RBL Bank 6.10 11287.14
DCB Bank 6.00 11264.93
Indusind Bank 6.00 11264.93
Bandhan Bank 5.50 11154.42
Karur Vysya Bank 5.50 11154.42

Tenure: 3 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
DCB Bank 6.50 12134.08
RBL Bank 6.30 12062.63
Indusind Bank 6.00 11956.18
IDFC First Bank 5.75 11868.13
Canara Bank 5.50 11780.68

Tenure: 5 years

Bank Name Interest rate (%) Compounded qtrly What Rs 10,000 will grow into
DCB Bank 6.50 13804.20
RBL Bank 6.50 13804.20
IDFC First Bank 6.00 13468.55
Indusind Bank 6.00 13468.55
Axis Bank 5.75 13303.65

All data sourced from Economic Times Intelligence Group (ETIG)
Data as on August 5, 2021The interest rate offered on fixed deposits (FDs) will depend on the period for which you are investing in the FD and also vary from bank to bank for FDs for the same tenure. Senior citizens are typically offered higher interest rates. To receive the interest payment, you can choose either cumulative option or non-cumulative option.

Under the cumulative option, interest accrued on the deposit is reinvested and paid at the time of maturity along with principal amount.

In the non-cumulative option, interest is credited into the depositors account at the pay-out interval chosen at the time of placing the FD. Generally, one can choose from the options of receiving the interest on monthly, quarterly, half-yearly or annually basis as offered by the bank.

Interest received on FD is fully taxable in the hands of the investor. It will be taxed at the rates applicable to your income tax slabs. TDS will be deducted by the bank if the interest payment in a single financial year exceeds Rs 10,000, as per current tax laws. To avoid TDS, one can submit Form 15G or Form 15H (as applicable) to the bank.In case of any urgent requirements, one can break his/her FD before the maturity date. A penalty may be levied by the bank on premature withdrawals. The penalty amount varies from one bank to another.

While placing a FD, one must check the rules regarding pre-mature withdrawals. Sometimes, banks offer FDs without premature withdrawal facility as well as FDs without penalty on premature withdrawal.

One can use FD as a collateral to obtain a loan. The maximum loan sanctioned is usually a certain percentage of the principal deposit. This percentage may vary bank to bank.Nomination facility for Fixed Deposits (FDs) is also available.At maturity, if no specific instructions are given, most banks automatically renew the FD for the same period for which it was initially placed at the interest rates prevailing on the date the FD matures. If you do not want automatic renewal of your FD, you need to choose this option on the account opening form.

If you have forgotten to mention it, then you can visit the bank branch on the day of maturity and ask them to credit the proceeds into your savings account.

Nowadays banks offer the facility of opening an FD account online via Net banking through your account. One can invest in FD without having to visit a branch physically. However, remember that your bank may not issue you a printed FD receipt/advice if invested online.

Disclaimer: The data/information given above is subject to change therefore before taking any decision based on it, contact the bank/institution concerned.

For any queries or changes, please write to us on etigdb@timesgroup.com or call us at 022 – 66353963.



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Raghuram Rajan, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: The term ‘Quantitative Easing’ became widely known in financial markets during the last Global Financial Crisis of 2008. Former RBI governor Raghuram Rajan, who famously predicted that particular collapse, has recently warned about the risks associated with excessive largesse from central banks.

In a recent article, Rajan flagged the potential pain that global financial markets might see when central banks turn off the easy money tap.

The world over, government debt is rising exponentially and more worryingly, an increasing amount of the debt maturity profile is skewed through issuance of longer-dated securities.

Political dispensations typically look past long-term debt, as the exigencies of democratic politics may ensure that a successive administration has to bear the burden of earlier borrowings.

“…What if interest rates start moving up as inflation takes hold? If government debt is around 125% of GDP, every percentage point increase in interest rates would translate into a 1.25 percentage point increase in the annual fiscal deficit as a share of GDP,” the RBI ex-governor wrote.

SHORT-TERM EXPOSURE
Rajan specifically warned about the risks that economies are exposing themselves to on account of the inevitability of interest rate hikes.

“When the central bank hoovers up five-year government debt from the market in its monthly bond-buying program, it finances those purchases by borrowing overnight reserves from commercial banks on which it pays interest… QE thus drives a continuous shortening of effective government debt maturity and a corresponding increase in (consolidated) government and central bank exposure to rising interest rates,” he wrote.

LESSON FOR INDIA?
India’s public debt profile worsened significantly well before the pandemic. Government debt, which till three years back used to be confined to Rs 6 lakh crore on a gross basis, has risen by around 80% over the last 2-3 years.

This financial year, the government has announced a gross borrowing programme of Rs 12.06 lakh crore. When interest rates rise, as they must at some point, the shock to banks’ profit margins could be huge after this degree of exposure.

In recent chats with ETMarkets.com, some leading economists have flagged the issues emanating from such elevated levels of public indebtedness.

“Scenarios where debt-to-GDP becomes a problem can always emerge, especially if nominal GDP growth is not close to double digits. However, as of now, our baseline view is that general government debt-to-GDP is close to 88-90%, but it is unlikely to become a concern for the rating agencies, because we expect a gradual downward trend after two to three years,” Standard Chartered Bank’s head of economic research Anubhuti Sahay said.

“… with public debt at close to 90% of GDP, fiscal headroom to deal with another wave is now further compromised. And then, there is not a whole lot that additional monetary accommodation can achieve,” ANZ Bank’s Chief Economist for South East Asia and India Sanjay Mathur said.

Raghuram Rajan perhaps reserved the most hard-hitting part of his recent note for the last paragraph.

“As for the US, not only is the outstanding government debt much shorter in maturity than that of the UK, the Fed already owns one-quarter of it,” he wrote.



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RBI warns against combination of high public debt, low interest rates, BFSI News, ET BFSI

Banking & Finance

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New Delhi: As economies around the world witness ultra-low interest rates and rising public debt amid the pandemic, the Reserve Bank of India (RBI) has said that the combination would pose challenges.

The pandemic response saw a tight interaction of monetary and fiscal policy. As monetary policy has sought to control a larger segment of the yield curve, the overlap with public debt management has grown, noted RBI’s Financial Stability Report for July.

It noted that with monetary policy committed to an easy stance for some time in many countries, the fiscal stance becomes important.

Too loose a fiscal stance could cause inflation surprises and financial conditions could tighten, it said, adding that a more constrained fiscal policy would add pressure on monetary policy.

“It would test the efficacy of further monetary expansion and could heighten intertemporal tradeoffs,” it said.

The extraordinary combination of high debt-to-GDP ratios and ultra-low interest rates raises three challenges, said the central bank’s report, with the first being the risk of fiscal dominance.

Further, it may also lead to a situation where fiscal positions may ultimately prove unsustainable and the complications of the possible joint “normalisation” of fiscal and monetary policies would also crop.

Growth-friendly fiscal policy, the RBI suggested, can help by effectively targeting public infrastructure and productivity.



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LIC Housing Finance cuts interest rates to 6.66%

Banking & Finance

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LIC Housing Finance Ltd (LICHFL) has cut its home loan interest rate from 6.90 per cent to 6.66 per cent under a special limited period offer. This interest rate is applicable for home loans up to ₹50 lakh for salaried individuals. This is probably the lowest home loan interest currently being offered by any lender.

The housing finance company, in a statement, said new borrowers whose loans are getting sanctioned till August 31, 2021 will be eligible for the special offer provided the first disbursement is availed on or before September 30, 2021.

LICHFL said the rate of interest offered is linked to the borrower’s creditworthiness, as reflected by their CIBIL scores. “At 6.66 per cent, LIC Housing Finance Ltd has offered its lowest ever rate of interest on housing loans with a maximum tenure of 30 years,” the company said.

Also read: Centre’s big push to LIC’s mega IPO

MD and CEO Viswanatha Gowd added, “…Considering the impact of the pandemic, we wanted to offer an interest rate that would help in uplifting the overall sentiments and aid more individuals to fulfil their dream of owning their own house. “We hope that this reduction in home loan interest rate will further boost customer confidence and help in early revival of the sector.”

Currently, State Bank of India (SBI) offers home loans at interest rate starting from 6.70 per cent. Lenders such as HDFC and Kotak Mahindra Bank offer home loans at interest rates starting from 6.75 per cent. Kotak Mahindra Bank is quoting special interest rate of 6.65 per cent for balance transfers.

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Dollar fights for footing as Fed minutes eyed

Banking & Finance

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The US dollar found pockets of support in Asia on Monday, but struggled to post gains, as investors are heavily positioned for it to fall further while the US Federal Reserve holds interest rates low and US trade and current account deficits grow.

Easing commodity prices and virus outbreaks in Singapore and Taiwan — where Covid-19 had been contained — helped modest dollar gains of 0.2 per cent against the Australian and New Zealand dollars in the early part of the Asia session. The greenback also rose 0.1 per cent against the euro and the yen. But it remains close to testing major support levels, which if broken could see a return to a downtrend that pressed it lower through April.

Also read: Rupee rises 13 paise to settle at 73.29 against US dollar

A dollar bounce that followed higher-than-expected inflation data last week has also faded as traders figure the Fed will keep rates low. The dollar last traded at $1.2134 per euro and has support around $1.2179. The dollar index is likewise, at 90.389, just above key supports at 89.677 and 89.206. It bought 109.45 yen and traded at $0.7758 per Aussie and $0.7228 per kiwi.

Fed minutes, from an April meeting that predated the data surprise on inflation last week, are due on Wednesday and are the next market focus for clues on the Fed’s thinking.

“We expect the minutes … to reiterate that policymakers consider the pick up in inflation to be transitory,” said Kim Mundy, a currency strategist at the Commonwealth Bank of Australia in Sydney. “The upshot is that we do not expect the (Fed) to consider tapering its asset purchases soon,” she said. “The dollar is expected to resume its downtrend this week after last week’s CPI-inspired boost.”

Speculators increased their bets against the dollar last week, mostly by adding to bets on the euro and to a lesser extent sterling as Britain and Europe head toward recovery. Sterling was perched near a two-and-a-half-month high on Monday, at $1.4085, as Britain reopens its economy after a four-month Covid-19 lockdown.

Things are travelling in the opposite direction in Asia where some early leaders in taming the pandemic are now dealing with new outbreaks. Singapore and Taiwan have both tightened curbs as cases rise and the Taiwan dollar fell to a three-week low on Monday. The dollar crept up 0.1 per cent against the Chinese yuan to trade at 6.4424 ahead of industrial output and retail sales figures due mid-morning on Monday. Elsewhere, cryptocurrencies traded under pressure after another weekend bouncing around following tweets from Tesla boss Elon Musk. Bitcoin hit its lowest since February on Sunday after Musk hinted at Tesla possibly selling its holdings. Bitcoin last traded 2 per cent weaker at $45,302 and ether was 4 per cent lower at $3,421.

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Simply Put: Roll-down strategy – The Hindu BusinessLine

Personal Finance

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Mutual fund houses have been rolling out scheme after scheme, the past several months. Among the ones rolled out are also those that follow what is called the roll-down strategy. Two friends, Sita and Geeta discuss what it is.

Sita: All these years, I was made to believe that equity mutual funds (MFs) are risky and that debt MFs are a safe bet. Now I see debt MF returns fluctuating too. So, where do I invest?

Geeta: Why don’t you invest some money in a roll-down strategy MF scheme?

Sita: What’s that? Is that a scheme where hard-earned money rolls down from my pocket into the wallets of mutual fund houses! Just joking. Can you please explain?

Geeta: Sure. While debt fund returns may not gyrate as much as equity fund returns, they are not all safe. Debt investments suffer from interest rate risk – as interest rates go up, prices of existing bonds fall, hurting MF debt scheme returns. The reverse holds true too.

Target maturity funds and fixed maturity plans (FMPs) follow the roll-down strategy and help minimise the interest rate risk.

Sita: How do they achieve this?

Geeta: Such schemes invest in debt papers of a certain maturity and then hold them till maturity. As time passes, the maturity of these papers and so of the scheme portfolio gradually goes down. And with it, the interest rate risk.

Such schemes offer some degree of return predictability. On maturity, you are returned your original investment plus return.

Sita: From now on I’ll invest only in such schemes to get assured returns.

Geeta: Not so fast. These schemes promise only return predictability and not return certainty. They give you a fair sense of what your returns are likely to be and not what they will be. After all, debt MFs are market-linked products, and nothing is guaranteed.

Sita: I understand. Anything else that I should know?

Geeta: I forgot to mention – all this applies only if you stay invested until the end of scheme maturity.

If you decide to redeem your investment any time before that (of course, FMPs don’t allow premature exit), then the roll down strategy won’t save you from interest rate risk.

Your return can, then be higher or lower than that indicated at the start, depending on whether interest rates have fallen or risen since you invested.

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Interest rates on education loans see a decline, BFSI News, ET BFSI

Banking & Finance

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The Covid-19 pandemic and rising fee structure of education has made it difficult for parents to fund their children’s higher studies.

As the Reserve Bank of India (RBI) slashed repo rates by 75 basis points in March and 40 basis points in May last year, the banks have cut down on loan rates across categories.

Public sector banks contribute over 70% of total education loans along with NBFCs. Public sector banks including Union Bank of India are offering the cheapest loans, with rates starting at as low as 6.80% for a Rs 20-lakh loan with a tenure of seven years.

Central Bank of India, Bank of India, Bank of Baroda, State bank of India offer education loan at 6.85%. Whereas, Punjab National Bank, IDBI bank, Canara Bank charge 6.85% Interest on Education Loan.

Bank of Maharashtra and Indian Bank charge 7.05% and 7.15% interest respectively on education loans.

State Bank of India’s (SBI) rates have dropped marginally by 5 basis points over the last two months.

In the recent announcement the Union government informed Parliament that Nearly 9.55% of education loans extended by public sector banks were categorized as non-performing assets (NPAs) as on 31 December.

Out of total education loans disbursed, 366,260 accounts worth ₹8,587 crore have turned bad, the govt said.



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