How Much Interest Rates are Charged by Indian Banks for Study Abroad Loans?

Studying abroad has become a normal trend in India in the last few years. The Bureau of Immigration states the number of Indian students who went abroad was 7.6 Lakhs in 2023. Many of them fulfill their dream with the help of an education loan, as the Indian banks offer flexible loan options to attract more student borrowers. In 2022-2023, around 17.6 k Crore was disbursed by Indian banks for education loans, both domestic and abroad.

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Types of Abroad Education Loans Offered by Indian Banks

Indian banks offer study abroad loans with or without collateral. Usually, education loans with collateral have a lower interest rate compared to study loans without collateral. 

How are Interest Rates Charged by Indian Banks? 

In India, loan rates aren’t fixed. Banks and financial institutions (FIs) set their own “benchmark lending rates” based on the Reserve Bank of India’s (RBI’s) repo rate and reverse repo rate. These RBI rates act like a compass, steering loan rates up or down.

Repo Rate: The rate at which the RBI lends money to banks. Higher repo rate means costlier loans for banks, often leading to higher interest rates for borrowers.

Reverse Repo Rate: The rate at which the RBI borrows money from banks. A lower reverse repo rate discourages banks from parking funds with the RBI, potentially leading to lower loan interest rates.

The RBI adjusts these rates to influence the economy. For instance, increasing the repo rate aims to control inflation by making borrowing more expensive. Conversely, lowering the repo rate can stimulate economic growth by making borrowing cheaper.

Remember, the RBI considers other factors like inflation and economic growth when making its decisions.

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Interest Rates for Abroad Education Loans from Indian Banks

The Monetary Policy Committee (MPC) announced on 8 February 2023 that the repo rate was increased by 25 basis points. This makes the current repo rate 6.50% (from the 6.25% that it was earlier).

The reverse repo rate stands unchanged at 3.35%. The Bank Rate and the Marginal Standing Facility (MSF) rate have changed to 6.75%. The Standing Deposit Facility Rate is 6.25%.

• Based on the changes, the current abroad education loan interest rates are 8% – 12% for collateral loans in public and private banks. 

• For no-collateral loans, the interest rates vary from 9% – 13% in public and private banks. 

Tips to Secure a Lower Interest Rate from Indian Banks

Indian banks offer affordable interest rates for abroad education loans in general. The following tips will help you lower the interest rates further: 

• Have a cosigner with a strong financial profile: A cosigner with a strong financial profile can provide the required creditworthiness. With a high CIBIL score and fewer existing debts, chances are higher for lower interest rates. 

• Provide high collateral security: For secured education loans, interest rates are influenced by collateral values. If your collateral is of a higher amount, the interest rates can get as low as possible. 

• Have a good academic record: Students with a good academic record have better chances of getting interest benefits. For premier institutions abroad, many banks offer special loan products with lower interest rates. 

• Explore interest subsidies and tax benefits: The Indian government offers interest subsidies for eligible students. All students who have secured an education loan abroad from an Indian bank can apply for tax benefits under Section 80 E of the Income Tax Act. 

Indian banks support your study abroad dream by offering education loan products at affordable interest rates. Carefully read the terms and conditions before you start with the application.

However, the application process includes the hassles of frequent bank visits and documentation. Often, Indian banks take a long time to process your application. Save yourself from the hassles as Nomad Credit smoothens the process for you. With our industry partnerships and experience, we fast-track the whole process and assist you at zero cost. Experience a better loan application with us!

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