Mumbai, Oct. 9: The State Bank of India (SBI) today took a cue from some of its peers to cut interest rates on car and consumer goods loans by at least 25 basis points.
The country’s largest bank announced the launch of a special offer for the festival season that will cover the purchase of cars, two-wheelers and consumer durables.
Under the special offer, which will remain in force till January 31 next year, the SBI is offering car loans at an interest rate of 10.55 per cent, which is a cut of 20 basis points.
The bank added that the processing charge in such loans had also been reduced from 0.51 per cent of the amount (with a minimum of Rs 1,020) to a flat rate of Rs 500.
The SBI has also launched a “Special Festival Loan” for its salary account holders for the purchase of consumer durables and two-wheelers. Under this scheme, the effective interest rate will start from 12.05 per cent per annum. The bank did not say whether the interest rate relaxation would also cover non-salary account holders.
Prior to the reduction, the bank offered an interest rate of 18.05 per cent on two-wheeler loans for up to three years.
The rate reductions follow the government’s step to provide additional capital to nationalised banks so that they can offer more credit to auto and consumer durables sectors to stimulate demand in the economy.
Following the announcement, a few state-owned lenders have lowered interest rates on such products. For instance, Dena Bank on Wednesday reduced interest rates on various retail loans including home and car loans. The lender will provide home loan at the base rate, which is at 10.25 per cent for up to Rs 1 crore and 10.50 per cent for loans above Rs 1 crore. The interest rates on car loan also have been reduced 100 basis points to 11 per cent from 12 per cent.
The rate relaxation on consumer loans will only be extended to those covered by the bank’s corporate salary scheme. Here, the rate of interest has been reduced 100 basis points to 12 per cent.
On Tuesday, Punjab National Bank (PNB) and Oriental Bank of Commerce had lowered their lending rates. PNB brought down the interest rates on car loans to 10.65 per cent and sweetened the offer by waiving the upfront fee and documentation charges. The bank is also offering finance to the extent of 100 per cent of the ex-showroom price of the car.
Incidentally, the rate cuts come only days after the Reserve Bank of India (RBI) barred banks from offering zero per cent EMI schemes on credit card outstanding.
It now remains to be seen whether the private sector lenders will also follow suit by bringing down interest rates on their loan products. The indication is that they are unlikely to do so with sources saying their interest rates were already “competitive’’.
WHAT’S ON OFFER
• Car loan rate cut to 10.55%. Offer
in force till January 31, 2014
• Processing charges at flat rate of Rs 500
• Under Special Festival Loan scheme, salary account holders will get concessional loans for consumer durables and two-wheelers at rates starting from 12.05%