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Have the country’s public sector banks completely given up on expanding their retail finance portfolio?
At a time when rise in bad loans from corporate and small and medium enterprises are denting banks’ profitability, retail loans like home and automobiles are seen as the only silver lining. Not only are non-performing assets the lowest in retail, but retail loan growth is also better than the industry.
According to Reserve Bank of India (RBI) data, retail loans grew by 16% year-on-year as till March 21. All the segments in retail loans like home loan and auto loans fared better growth than the industry average. Home loans, for example, grew by 17.4% while auto loans went up by 16.2%. Total credit growth in the banking system till March 21 was 9.3% though the figure went up to 12.7% as on April 2, mainly due to ‘window dressing’ by banks to shore up their balance sheet to meet yearly target.
None of the public sector banks, barring State Bank of India, have reduced their base rate in April. Most large private sector players, those who are more aggressive on the retail front, like ICICI Bank, HDFC Bank, Axis Bank has revised their base rate, as a result, now they charge lower rate on home and auto loans. SBI, in fact, went ahead and lowered home loan rate for new customers by an additional 10 bps in order to match it with ICICI Bank’s rate cut. ICICI Bank had reduced their base rate by 25 bps to 9.75% while SBI had reduced it by 15 bps to 9.85%, Both the lenders had their base rate at 10 per cent before the reduction.
All major home loan players now offer 9.9% for new home loan customers.
Compare this with some of the public sector banks which has not reduced its base rate. Bank of Baroda, for example, which has also become aggressive in retail, offers home loan at 10.25%. The rate difference is 35 basis points as compared to SBI.
There is saving of Rs 18 per month (EMI will come down by Rs 18) if interest rate if 15 bps lower for a loan of Rs 1 lakh with a tenure of 30 years.
This is the lesson all the public sector banks should learn from SBI.
