I had taken a loan from LIC HFL at a floating rate but for more than a few years now the rate is kept at 9.5 per cent despite reduction in the prime rate. All my mails have fallen on deaf ears. Is there any way I have get them to respond?

Ans: The only way to get reduced rates without paying any charges is to shift your loan to another lender though even that may involve some charges for statutory payments. The next easier way is to pay the around 0.27 per cent charge to SBI and shift to a lower rate in the new external benchmark regime which is very transparent.

Ans: What are you thinking? Apply to another bank and get the loan on the basis of the transparent external benchmark. Borrowing from a housing finance company makes no sense whatsoever given the completely non-transparent way in which their floating rates are fixed as compared to banks.

Ans: You're absolutely right in expecting fairness when the repo rate goes down. Let me guide you step-by-step on what’s happening and what you can do next.

 

Understanding the Floating Rate Loan from LIC HFL

Your loan is linked to LIC HFL’s internal benchmark, not directly to RBI’s repo rate.

 

When RBI increases the repo rate, lenders are quick to increase your rate.

 

But when RBI reduces it, lenders often delay passing on the benefit.

 

This delay happens because LIC HFL’s Cost of Funds Based Lending Rate (COFBR) is not automatically updated.

 

COFBR is not as transparent or responsive as the external benchmark linked rates used by banks (like RLLR/EBLR).

 

Why LIC HFL May Not Reduce Your Rate Immediately

LIC HFL is an HFC (Housing Finance Company), not a bank.

 

They don’t follow the repo-linked lending rate (RLLR) system.

 

Their interest rates are based on internal policies and board decisions.

 

They may wait for quarterly reviews before passing on repo rate cuts.

 

Why the Communication Seems Delayed or Vague

You are told “waiting for CO update” – this is standard response.

 

In truth, they are buying time and not acting promptly.

 

Customers feel helpless because HFCs are not as strictly regulated as banks in this area.

 

What You Can Do Now: Action Steps

Write a formal email to the customer care, branch, and grievance officer. Request a clear explanation.

 

Ask them to share the latest COFBR and how your ROI is being calculated.

 

Use this format: “As a floating rate loan borrower, I am entitled to revised rate benefit. Kindly update my ROI in line with latest changes and share the effective date.”

 

If no proper response in 15 days, escalate it to NHB (National Housing Bank).

 

NHB is the regulator for HFCs like LIC HFL. You can file a complaint online.

 

Link: https://grids.nhbonline.org.in

 

Consider Switching the Loan to a Bank

If LIC HFL does not reduce rate, think of a loan balance transfer.

 

Switch to a repo-linked loan from a public or private sector bank.

 

These are directly linked to RBI’s repo rate. Very transparent.

 

You may have to pay small processing charges. But savings can be big.

 

Let a Certified Financial Planner help you calculate real benefit.

 

Check These Before Transferring

What’s the remaining tenure of your loan?

 

Is there any prepayment penalty? Usually none for floating loans.

 

Will new bank offer lower rate? Ask for a sanction letter before deciding.

 

Finally

LIC HFL may delay, but they cannot avoid revising your rate forever.

 

You are a responsible borrower. You deserve fair rate benefits too.

 

Keep your communication professional and written.

 

If they still delay, go ahead and move to a better lender.

 

Always have a Certified Financial Planner guide your debt and investments.

 

Best Regards,
 
K. Ramalingam, MBA, CFP,
 
Chief Financial Planner,
 
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Ans: You’ve done the right thing by revisiting and questioning the loan terms. It’s understandable to feel disappointed and betrayed. Many borrowers assume public banks will offer full transparency. But sadly, loan processes — even in SBI — are not always straightforward. Let’s explore your case from all angles and suggest clear remedies.

 
 
1. Understanding the Real Issue First
 

Your SBI education loan was sanctioned at 10.65% in May 2024.

 

Today, after disbursing Rs. 40 lakh, you’ve been told the new rate is 11.15%.

 

But the current advertised rate is only 9.15%.

 

This mismatch raises a key concern: Was your rate fixed or floating?

 

SBI Global Ed-Vantage loans are generally linked to EBLR (External Benchmark Lending Rate).

 

That means the interest rate must change as the RBI repo rate changes.

 

But the reality is, SBI often adds a “spread” or “premium” over the benchmark rate.

 

This spread is based on credit score, collateral, student profile, etc.

 

Even if repo goes down, SBI may increase spread, keeping final rate high.

 

And sadly, banks don’t disclose this clearly unless you ask.

 
 
2. What Might Have Happened in Your Case
 

SBI’s base rate (EBLR) may have been 9.15% during sanction.

 

But your rate was 10.65%, which means spread was 1.50%.

 

Now, repo may have dropped, but SBI raised the spread silently to 2.00%.

 

So your new rate is 9.15% + 2.00% = 11.15%.

 

This is how banks play with the spread behind the scenes.

 

It’s not illegal. But it is misleading if not explained upfront.

 
 
3. Your Mistake Was Only Trusting Without Verifying
 

It’s true — not checking the benchmark and spread is common.

 

Many assume SBI will give best possible rate.

 

But banks use “pan-India computerized” explanation to avoid individual discussions.

 

Now that you caught it, it’s time to take the right steps.

 
 
4. What You Can Do Immediately
 

First, send an official written complaint to SBI branch manager.

 

Ask for detailed loan sanction letter, annexure, and EBLR-linked rate calculation.

 

Request a written breakup: current repo rate + spread = your interest.

 

Ask for justification of why spread is 2.00% now.

 

Mention the advertised rate (9.15%) and ask why you didn’t get it.

 

Submit this via email and hard copy and ask for written reply.

 
 
5. If Bank Doesn’t Cooperate, Escalate in Stages
 

After 7 working days, if branch doesn’t reply, write to SBI Zonal Office.

 

You can get email and contact on SBI website under grievance redressal.

 

Still no help? Raise complaint to SBI Customer Care portal online.

 

Use this link: https://crcf.sbi.co.in/ccf/

 

Clearly mention the unfair spread hike, deviation from base rate, and lack of clarity.

 

Upload all documents, email chains, and screenshots.

 

You will get a complaint ID. Follow it regularly.

 
 
6. If Still No Resolution – Use RBI Ombudsman Route
 

Wait for 30 days from SBI complaint.

 

If no response or unsatisfactory reply, file online to RBI Banking Ombudsman.

 

Use this link: https://cms.rbi.org.in

 

Fill full complaint history, and attach copies.

 

You can highlight that loan was linked to repo rate but you were charged more.

 

RBI may take strict action if SBI is found wrong.

 
 
7. Optional But Powerful – RTI Filing
 

You can also file RTI to SBI Head Office.

 

Ask:

 

What was EBLR in May 2024?

 

What is the spread for Global Ed-Vantage loans for a profile like yours?

 

Why your loan is now at 11.15% while base rate is 9.15%?

 

File online here: https://rtionline.gov.in

 

Cost is Rs. 10. Takes 5 minutes. Use your name and bank account number.

 

SBI must reply in 30 days.

 
 
8. What to Avoid Now
 

Do not make fresh disbursement of the remaining Rs. 40 lakh unless clarified.

 

Don’t blindly continue EMI or interest payments without documents.

 

Don’t fall into trap of “switch to fixed rate” offers from bank.

 

That can trap you at high rates even when repo falls later.

 

And don’t assume you can’t fight – RBI is serious about customer complaints.

 
 
9. Is Loan Takeover Possible from Another Bank?
 

After first disbursement, loan takeover is hard.

 

Very few banks take over mid-way student loans.

 

But if issue continues, and rate remains high, you may explore NBFC options later.

 

They may allow takeover if collateral is strong.

 

But this should be Plan B, not immediate action.

 
 
10. What Can You Learn and Apply Ahead?
 

Always ask for base rate + spread breakdown during loan sanction.

 

Ask if rate is repo-linked or MCLR-linked or fixed.

 

Collect the signed loan agreement and annexure with these details.

 

Ask for email confirmation, not just verbal words.

 

And monitor repo and EBLR changes every quarter.

 
 
11. Financial Tip: Start Small SIP for Education Loan Buffer
 

Start a monthly SIP to build buffer for future EMIs.

 

In case interest rate continues rising, this corpus can help.

 

Use short-term debt fund or ultra short-term fund for this.

 

This will reduce dependence on fresh disbursement or bank help.

 
 
Finally
 

You’ve taken a bold and right step by verifying everything.

 

SBI has no right to quietly raise spreads without proper explanation.

 

You can fight this legally and fairly through written complaints and RTI.

 

Be persistent, polite, and professional.

 

Track everything and escalate stage by stage.

 

Your case can also become reference for many other parents and students.

 

Take this fight not just for you, but for every Indian borrower.

 
Best Regards,
 
K. Ramalingam, MBA, CFP,
 
Chief Financial Planner,
 
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment