Public v/s Private Education Loan Providers

5 mins read13.7K Views Comment
Piyush Kohli
Study Abroad Expert
Updated on Feb 9, 2022 17:08 IST

The biggest wealth one generates through education is knowledge, however, it is not just education but quality education that matters. In order to get the quality education, more and more students are going abroad. According to recently released data from RBI reveals that spending on tuition and hostel by Indian students going abroad has increased 44% from $1.9 billion in 2013-14 to $2.8 billion in 2017-18 and is expected to increase by 1.8 million approximately by 2024 academic session. The exorbitant increase is evident that people are preferring to pursue skill education abroad. From the last three consecutive years, the expense has continuously risen (see graph below). It was close to $2 billion in 2016 which has risen to almost $3 billion in 2018 and a further $1.2 billion in 2019 and 2020. Check: Everything You Need to Know About Education Loan

Acquiring quality education is becoming expensive day by day. Arranging for funds to finance the education abroad is one of the biggest challenges one face. People overcome this hurdle with the help of student loans. Also, there are numerous institutions one can think of while taking an education loan. The biggest chunk of the market is with public sector banks, however, private banks and NBFCs (non-banking financial companies) are also catching up rapidly. Public sector banks offer low-interest rates, no pre-payment charges, and low processing fees. Whereas, private sector banks provide enhanced customer service, high-interest rates (as compared to public sector banks) and faster processing. Contact India’s leading education loan providers through Shiksha Study Abroad.


 (Source: Reserve Bank of India)

Government Banks vs. Private Banks for Education Loan to Study Abroad

There is a huge difference while taking a student loan from a public sector bank or a private sector bank. In this article, we’ll compare the difference of taking a student loan from a government bank (SBI, PNB, Canara, Syndicate Bank) or a private bank (ICICI, Yes Bank, Kotak Mahindra Bank, HDFC).


Government Banks

Private Banks

Interest Rates

Any change in repo rate by the central bank gets a transfer to the customers with immediate effect.

The change in Repo rate does not result in a decrease of interest rates even for the existing customers.

Prepayment Charges

There is a huge advantage as it comes to prepayment charges, as public sector banks do not charge levy any prepayment charges.

If the borrower wants to prepay the loan then private banks generally charge 2% of the remaining loan amount as they do not want to lose out on the interest they are earning.

Prepayment Period

Generally, there is no such condition. The borrower can repay the complete loan amount whenever he/she arranged it.

Usually, the borrower cannot repay the loan before completing 6 months of his/her loan.

Processing Fees

The processing fees charged by banks range between 0.5% to up to 1% of the total loan amount or any fixed amount. The processing fee charged by the government banks is generally low compares to the private sector banks as they do not promote selling through agents.

Private banks can charge up to 2% of the loan amount. Many times, private banks have to give commission to their agents in order to bring customers, so, the processing fee is higher in private banks.

Trust Factor

Although this factor doesn’t affect your loan in any way, it is one of the most important factors one considers before taking the student loan.

It is said that the public sector banks have more transparent policies in comparison to the private sector banks.

It is a general thought among the customers that private banks have various kinds of hidden charges which they don’t disclose at the time of disbursing the loan.

Their policies are driven by profit-making, so, it is always better to read the complete terms and conditions in advance before taking any decision.

Also Read: How to choose your bank for Education Loan to Study Abroad

Top Banks for Study Abroad Education Funding

In order to be eligible to apply for an education loan from an Indian government bank, the applicants applying should take the following information into consideration


  • Applicant must be an Indian citizen residing in either India or abroad / NRIs / OCI / PIO.
  • They can apply for any level of study in any country - UG, PG, Research / Doctoral, etc.
  • Students must be enrolled in either public, private, professional and international institutions.

Documents Required:

  • Indian ID Proof - Aadhar Card / Pan Card
  • Bank Statement 
  • Address Proof
  • Salary Slips
  • ITR Proof
  • Passport sized photograph
  • Visa proof
  • Valid Passport

Top Banks with Interest Rates Offering Indian Students an Education Loan

As per the recent revaluation in interest rates in 2021, the interest rates have risen by 0.16% since 2020 quarter. Check: Indian Banks offering Education Loans for Studying Abroad

The following table elaborates a brief estimate upon how much the Indian students would be charged while studying abroad:

Indian Public / Private Banks Interest Rates Minimum Loan Amount Loan Tenure
Indian Public Banks
PNB Educational Loan 8.75% to 9.50% based on requirement or need based 15 years
SBI Education Loan 8.65% varies 15 + 1 years
Axis Bank Education Loan 13.7% to 15.2% INR 50,000 15 years
Bank of Baroda Education Loan 7.85% to 9.85% INR 12,50,000 -
Private Banks
Kotak Mahindra Bank Loan 16% INR 7,50,000 5-7 years
Federal Bank Education Loan 10.05% INR 10,00,000 15 years
HDFC Bank Education Loan 9.55% to 13.25% INR 30,00,000 15 years
Union Bank of India Education Loan 8.8% to 10.05% INR 4,00,000 15 years

A lot of banks (both public an private) have the clause for collateral that is, propoerty or other immovable assests to be submitted with the bank against the loan taken till repayment. 

Also Check:

Apart from the public and private sector banks, NBFCs (non-banking financial companies) are also active in education loan segment. The average loan amount of the NBFCs is more than what the banks disburse as it is their main source of income generation. 90% of the NBFCs education loan portfolio is over INR 10 lakh i.e. they are preferred for big-ticket loans.

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While deciding on a student loan, always consider the above-stated facts and then take your decision wisely. Calculate the overall amount you have to return after adding both the principle and the interest then go for the one which is not heavy on your pocket. And in case you need faster and better service then go for the private sector banks.

Note: Always consult an expert before taking the final decision.

Quick links:

Education Loan to Study in USA

Education Loan for Studying in Canada

Education Loan for studying in France

Education Loan for Studying in Singapore

About the Author
Piyush Kohli
Study Abroad Expert

With a plethora of knowledge of the education domain, Piyush Kohli has been involved with study abroad for over 5 years and counting. He comes with prior experience on the complexities of the study abroad applicatio... Read Full Bio


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