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Calcutta, March 21: Prospective buyers of the Rs 1-lakh Tata Nano may be in for a rude shock if they are planning to take a bank loan to book the car. Banks are planning to charge higher interest than their card rates to finance the booking amount or the earnest money.

“Like a personal loan, the advance for the booking amount is an unsecured loan — a loan without any hypothecation or mortgage,” said an official of the State Bank of India, the sole booking agent for the Nano.

“No hypothecation or mortgage is created unless the borrower is actually allotted the car. Given the euphoria about the car, there will be a lot of uncertainties about getting an allotment against a booking,” he said. “The interest rate on advances for the earnest money to book a Nano will be treated on a par with the unsecured loan,” the official said, adding that the bank had not yet decided on the interest rate.

On Monday, Tata Motors will announce the booking process, including the earnest money required at the time of booking.

The State Bank may, however, convert the advance into a car loan with a lower interest rate once the car is allotted, the official said.

The country’s largest public sector lender charges 16.50 per cent interest rate for personal loans, while its car loan rates vary between 11.50 per cent and 12 per cent, depending on the tenure. The bank offers a maximum tenure of seven years for salaried people and five years for the self-employed.

The bank is also offering a discount rate of 10 per cent, fixed for one year, on car loans. The offer is valid till May 31 this year. So, if the car is not allotted within May 31, a person who has booked the car on a borrowed fund will not be able to get the benefit of the offer.

Tata Motors is reportedly tying up with a number of public sector banks to finance Nano buyers. However, banks are not very keen to extend advances for booking the car.

“We are not giving any loan for booking a Nano. But one can take a car loan at our existing rates once the car is allotted,” said Prabir Moulick, general manager (retail) of Allahabad Bank.

Private sector banks are also quite reluctant as they are already struggling to cope with growing non-performing assets in their unsecured loan portfolio.

ICICI Bank, the largest player in car loans, has already increased its interest rate on personal loans to 29 per cent and on credit cards to 49.36 per cent (annualised). Moreover, the bank is not giving any fresh personal loans and has tightened the norms for issuing new credit cards.