SBI extends teaser rates; Corporation Bank, BoB plan special schemes.
Forget the lending rate rise for the time being. Banks are getting into a festive mood. A few public sector banks have decided to reduce home and automobile loans till December 31.
State Bank of India’s (SBI), the country’s largest lender, has decided to extend its fixed-cum-floating rate home loan scheme for three months. The hugely popular scheme, launched in February last year, was scheduled to expire on September 30. Under the scheme, for the first year, home loans carry an eight per cent interest rate, which rises to nine per cent in second and third years.
Mangalore-based Corporation Bank has gone one up. It has bettered SBI’s offering, at least for the first year, by charging 7.75 per cent on home loans. Corporation Bank, charging 8.25 per cent for home loans less than Rs 30 lakh, has now launched a fixed-cum-floating home loan product which charges 7.75 per cent interest for the first year and 8.25 per cent for the next two years.
“The move will expand our client base and help us build volumes. We will be also able to cross-sell other products with these two,” said S M Swati, general manager, who looks after the bank’s retail portfolio. Corporation Bank is aiming to disburse Rs 1,000 crore home loans and Rs 300 crore auto loans with these initiatives. These special schemes are valid till December 31.
From the fourth year onwards, Corporation Bank will charge one per cent more than its existing base rate. At present, its base rate is 7.75 per cent, the lowest among all public sector banks, barring SBI. SBI’s base rate is 7.5 per cent.
The Mangalore-based bank has also reduced auto loan rates, and will charge eight per cent in the first year. While the bank has waived processing fees for all new home loan buyers, auto loan buyers will get 50 per cent off on the processing charges.
Another state-run lender, Bank of Baroda, is also planning to give “better rates” on home and auto loan products.
According to an IDBI Bank official, it is working on schemes on consumer and mortgage loans which involve cuts in interest rates by about 25 basis points, and a concession on processing changes in the festive season. The bank is likely to launch the scheme on October 1, its founding day.
However, other banks are finding it difficult to cut loan rates at a time when the cost of funds is rising. Subsequent to the Reserve Bank of India’s policy rate increases during the mid-quarter review on September 16, short-term deposit rates and one-year bulk deposit rates have started moving up.
