Bank of Baroda reduces floating rate car loan by 65 basis points to 8.75%

Five weeks before the close of the financial year, Bank of Baroda has slashed the interest rate on floating rate car loans by up to 65 basis points to provide a push to grow the auto loan portfolio. The lower rate is applicable for new customers only.

The new rate will start from 8.75 per cent as compared to 9.40 per cent previously, the bank said on Monday.

“The new rate, beginning at 8.75% per annum, is applicable on the purchase of a new car and is linked to a borrower’s credit profile. Additionally, the Bank is offering borrowers zero prepayment charges on the floating rate of interest option and a concession in processing charges on both fixed and floating interest rate options,” the bank said. The repayment period can be up to 84 months.

The limited period offer will be available between February 26 and March 31, 2024. The bank also has a fixed rate car loan, but most customers prefer a floating rate product as there is no prepayment penalty.

Sanjay Mudaliar, Executive Director, BoB, in a statement said, the bank is continuing to see strong demand for car ownership with passenger vehicle sales peaking in January 2024 on the back of a sustained improvement in the Indian economy, rising aspirations, and consumer confidence.

The Mumbai-based public sector lender also offers a fixed rate of interest option on Baroda Car Loans, starting at 8.85 per cent per annum.

There has been moderation in the pace of vehicle loans in the current financial year for BOB as well as for the banking sector.

BOB’s auto loan portfolio expanded by 24.3 per cent year-on-year basis at the end of December 2023, down from 27.5 per cent YoY growth a year ago. The outstanding portfolio stood at Rs 37,080 crore in December 2023, up from Rs 29,821 crore in December 2022 and Rs 23,384 crore in December 2021.

According to Reserve Bank of India data for the banking industry in India, the vehicle segment, which is part of the retail loan book, saw growth moderate to 20.5 per cent year-on-year basis in December 2023 from 24.6 per cent a year ago. The pace of loan growth in the retail segment declined to 17.7 per cent year-on-year basis in December 2023 from 20.4 per cent a year ago.