Mumbai, Sept. 3: With the festival season around the corner, banks are going into overdrive to crank up their retail loan portfolios.
Several lenders have already announced a reduction in lending rates on car and home loans even as they slashed processing charges.
The move has been triggered by the State Bank of India’s (SBI) move to bring down home and car loan rates last month and a directive from the finance minister P. Chidambaram to nationalised banks to reduce consumer loan rates.
Although some of their larger private sector counterparts have so far not joined the race, the reductions will only benefit new borrowers since these lenders have not altered their base rates.
The base rate — or the benchmark interest rate — is the minimum rate at which banks must lend.
Punjab National Bank (PNB), the country’s second largest nationalised bank, today announced a reduction of 50 basis points in home and auto loans.
The lender said that housing loans of up to Rs 75 lakh would now attract an interest rate of 10.50 per cent, or the base rate. Earlier, the interest rate was fixed at base rate plus 0.25 per cent amounting to 10.75 per cent.
Similarly, for home loans above Rs 75 lakh, the interest rate has been reduced to 10.75 per cent from 11 per cent.
On the other hand in car loans, a three-year loan will now be available at 11.50 per cent against 12 per cent earlier. Car loans above three years will also be 50 basis points lower at 12 per cent compared with 12.50 per cent earlier.
Last month, the SBI had brought down interest rate on housing loans up to Rs 30 lakh to 10.25 per cent from 10.50 per cent.
Similarly, home loans above Rs 30 lakh and up to Rs 75 lakh now carry an interest rate of 10.40 per cent against 10.75 per cent earlier, while home loans above Rs 75 lakh come at an interest rate of 10.40 per cent from 11 per cent earlier. In car loans, it brought down the interest rate to 10.75 per cent from 11.25 per cent.
After this move, the country’s largest bank is now reportedly bringing down the processing fee to Rs 1,000 irrespective the size of the loan. The processing fee is now 0.25 per cent of the loan amount, or a cap of Rs 6,500 for loans up to Rs 75 lakh.
The Union Bank of India has also brought down its home and car loan rates. The bank has also waived processing charges on these loans.
Some of the others who have brought such good news to new borrowers are the Central Bank of India, Corporation Bank and Indian Overseas Bank.