Banks may offer education loans at lower interest rates to students who get admission in well known and reputed educational institutions, like the IIMs. On top of that, an applicant's interest rate on education loan may be reduced further if he gets a high score in competitive examinations like the CAT.

A rating framework for rating educational institutions, courses and students is being developed by the finance ministry, to help banks in deciding the interest rate on loans for candidates based on these parameters.

In addition to this, before approving a loan application, banks will do a profile analysis of a candidate to decide on the interest rate to be charged from him. The candidate's performance during the entire loan period will also affect his interest rates. In case of loans where a guarantor is required, the credit history of the guarantor will also be taken into consideration, for approving a loan.

It is reported that finance ministry has already held meetings with various credit rating agencies and is pushing to implement ways which will reduce interest rates for meritorious students. Indian Banks' Association is formulating a framework and is expected to issue a circular on the matter soon.

It is to be noted that some banks already have exclusive education loan schemes for students studying in premier institutes like IIMs etc.