SBI, HDFC lower car loan rate
PSB Slashes Farm Produce Rates, Pvt Bank Eases Interest On Personal Loan TIMES NEWS NETWORK New Delhi/Mumbai: Banks seem to be ushering in a lower interest rate regime across sectors. After cutting its home loan rate by almost 3 percentage points to 8%, the country's biggest bank, State Bank of India, has lowered the car loan rate by 1.5 percentage points to 10% under the floating interest rate scheme. HDFC Bank has also reduced interest rates on personal loans and commercial vehicles from Monday. Car and commercial vehicle loans from HDFC Bank will become cheaper by 125 basis points (100 bps=1%) and two-wheeler by 150 basis points. At present, HDFC Bank charges 13.5-14% for car loans and 24-24.5% for twowheeler loans. Personal loans will also become cheaper by 75-100 basis points from the existing 17-17.5%. SBI has also announced massive cuts of up to 6.5 percentage points in interest rates to farmers against their produce, bringing the new rate to 8%. The reduction in the car loan rate should boost the auto industry, which had been facing a slowdown compounded by high interest rates. "As SBI is the leader in the car loan segment, other banks will be forced to follow suit to remain competitive,'' said a public sector bank chairman. A senior SBI official said the new offer would be for a limited period between February 23 and May 31, 2009. After that, the rate would be reset to the then prevailing rate on car loans. The official said that at present the bank was offering car loans at 11.5%. As the prime lending rate of the bank is 12.25%, the present floating rate on car loans is 75 basis points lower than the PLR. After one year, the interest rate on the car loan borrowed today at 10% will be reset at the then prevailing PLR minus 75 basis points. In 2008-09 so far, SBI has emerged as the biggest player in the car loan segment financing over one lakh cars. In 2009-10, the official said the bank is aiming at financing 2 lakh cars. The SBI car loan scheme offers the longest repayment period of up to 84 months (7 years) without any advance EMI. In the farm loan segment, too, SBI has slashed interest rates. In an attempt to "save farmers from falling prey to distress sale of their produce'', SBI has reduced the rate of interest for loans to farmers against cold storage and warehouse receipts to 8% per annum with immediate effect. These loans, till now, were being charged rates ranging from 10.5% to 14.25%, depending on the quantum of loan sanctioned. However, not many bankers are enthusiastic about the aggressive pricing by SBI. "It seems PSU banks are under pressure from the government. They are also not doing well in the small and medium enterprise segment. That is why they are aggressively pricing their auto loan products,'' said a banker from the private sector. Typically, auto loans from PSU banks are cheaper by 0.50% to 1.00% than their counterparts in the private sector. Some bankers also believe that such aggressive pricing can also hurt the profitability of the bank. "When you price a product, you have to include the cost of funds, operating costs and the losses you are likely to make. But what is happening is that while expanding their auto loan books banks are not looking into this nitty-gritty,'' said another banker who didn't want to be quoted. "This would mean you would not make any money from the business, as auto loans have higher operating costs and cost of servicing the segment is very high.'' However, these bankers are quick to point out that their criticism of aggressive pricing doesn't mean that the interest rates would remain high. "Rates have definitely eased and they are likely to come down further slowly,'' he added. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [email protected] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
