An increase in funding costs for banks just ahead of the festive season has meant that banks may not be in a position to offer any festive discounts on products like home loans this year.
Bankers seem less reluctant to push their home loan products through discounts between Diwali and Christmas — a season when demand for auto and home loan products typically picks up.
“Due to the current macroeconomic conditions, the home loan market has seen a slowdown. We are taking a little longer to convert a prospect to a loan. So we are not looking at any offerings during the festival season,” said Sumit Bali, executive vice-president (retail assets), Kotak Mahindra Bank.
Bankers point out that the increasing house prices in various cities has dampened the buyer's mood significantly, which has resulted in a fall in the home loan inquiries.
“The home loan portfolio as a whole is still strong, the short-term scenario seems challenging,” says Jairam Sridharan, senior vice president and head consumer lending, Axis Bank.The private sector lender is not expecting any bumper demand this season, and is yet to work out any special plans.
Kotak Mahindra Bank and Axis Bank had both upped their base rate by 25 basis points (bps) each to 10% and 10.25% respectively. Public sector banks are also unlikely to offer customers any significant discounts this year.
BA Prabhakar, chairman and managing director, Andhra Bank, says that the slowdown in demand for home loans meant that the bank would not be considering any major discounts this year. Moreover, if there is any further rise in the base rate, it may affect the bank's R7,000-crore home loan portfolio adversely, he said.
Andhra Bank too had raised its base rate this month by 25 bps, to 10.25%.
Other banks said that they would take a call on the festival discounts once the Reserve Bank of India announced its monetary policy in September.
While discounts may not be in the offing, some banks are conducting special drives and exhibitions to draw in more customers. Indian Overseas Bank recently conducted a home loan expo in Chennai with loans offered without processing