Banks are not only cutting interest rates to boost their home and auto loan portfolios, but are also offering administrative relief by giving discounts on processing fee to attract more customers. The country?s largest bank, State Bank of India, is the latest to cut processing fees on auto loans and home loans by 50%, after offering home loans at the cheapest rates.
SBI, which was already charging the lowest processing fee of up to R10,000 on home loans, has cut the fee to 0.125% of the loan amount for loans below R25 lakh, R3,250 on loan amount of R25 lakh to R75 lakh and R5,000 for loan amount of above R75 lakh. The bank cut the processing fee on auto loans to 0.255% of the loan amount, with a maximum cap of R5,100, from its earlier fee of 0.51% of the loan amount with a cap of R10,200.
“Even a small discount like this one is a sentiment booster for customers,” a senior executive of SBI said.
The executive said even if the processing fee waivers and discounts look to give small savings such moves have historically boosted loan applications for SBI.
Other banks like Punjab National Bank, Central Bank and Union Bank have waived their processing fees on home and auto loans completely during the festival season. But the SBI executive said these banks charged more fees compared with SBI and the interest rates are also higher. SBI now offers loans up to R30 lakh at 10% and loans above R30 lakh at 10.15%, and it is the only bank to cut the base rate by 25 basis points to 9.75%, after CRR cut by RBI last month.
Other bankers said processing fee cut and special discounts help them to be competitive during the festival season when retail loan demand surges by 10-20%.
“Processing fee cut is important, as during the festival season demand for retail loans in the market goes up by up to 20%, so small discount of R1,000 or R2,000 makes a customer choose one bank from another,? said Ram S Sangapure of Central Bank of India.