After a nudge from the government, most public sector banks are rushing to announce special schemes to spur consumption during the festive season.
On Wednesday, the country?s largest bank, State Bank of India (SBI), cut its interest rates on car loans to 10.55% from 10.75%. SBI also introduced a flat processing fee of R500 for auto and consumer durable loans against 0.51% it charged earlier. The bank launched a special scheme for customers holding a salary account in the bank by offering them consumer durable and two-wheeler loans at 12.05%.
Earlier in September, SBI had increased interest rates for auto loans from 10.45% to 10.75%. The bank had also tightened its eligibility criteria for car loans, fearing a rise in defaults.
Meanwhile, Central Bank of India has also waived its processing fees of R500 on two-wheeler loans and R2,000 on car loans for the festive season. ?Demand for auto loans has been sluggish. But we expect it to pick up by about 10-15% this season and are targeting an increase of R200 crore,? said Narender Singh, general manger for retail assets, Central Bank. While the bank is eager to garner business in this space, it is tightening eligibility criteria for such loans to prevent any increase in defaults. Bank of India, on the other hand, has started to offer loans for consumer goods and two-wheelers at 11% with no processing fees.
Late on Tuesday, Punjab National Bank (PNB), as part of its festive offer, cut interest rates on car loans to 10.65% while rates on two-wheeler loans and consumer durable loans were brought down to 12.2% and 12.75%, respectively. PNB also waived processing fee on its housing, car and two-wheeler loans.
At IDBI, home and auto loans are now being offered at the base rate of 10.25% and the processing fee has also been waived.
While most lenders are focusing their festive schemes on auto and consumer durable loans, smaller lenders like Corporation Bank have also cut home loan rates by 0.50% across all tenures. Indian Bank, too, is offering home loans at its base rate during the festive season.
Private sector banks have been more selective in doling out festive season loan schemes. Axis Bank is working out a scheme for Maruti and Hyundai cars where the lender will offer a combination of benefits, including lower processing fees and softer interest rates. It is also working on a special scheme targeted at government employees.
Despite this, Axis Bank is expecting a sluggish festive season. ?Unfortunately, there has been no sign of positive revival in the industry. Maruti’s domestic sales in September grew by 2% and that was passed off as good news. We need to see how things pan out this year,? said Jairam Sridharan, head of consumer lending at Axis Bank. The season typically sees a growth of 25-30% in the auto loan segment.
Kotak Mahindra Bank, however, is hopeful that the pent up demand will help drive growth during the season.
?Growth may be marginally good or flattish and not in the negative. Last year, we saw a growth of 15-20% in the festive season and, this year, we expect the same. Offers will be coming in from the manufacturers itself and we will be working with them and the dealerships closely for festive offers.,? said Sumit Bali, executive vice-president, Kotak Mahindra Bank.
