India’s largest bank, State Bank of India (SBI), is offering 10% interest rate on car loans for the first year. This move is expected to give car sales a major boost, especially among government employees, a majority of who hold deposits with the bank.
The central government has already released 40% of the revised salary arrears to its employees and expects to release the rest in April. The arrears relate to the Sixth Pay Commission award that revised upwards by up to 40% the pay package of 5.5 million civil servants. State governments have also begun revising the salaries of their employees.
The decision by the state-owned bank will shave at least 150 basis points off current loan rates for automobiles and other banks are also expected to follow suit. That will be good news for the ailing auto industry. Sales of passenger cars declined by 3.2% to 110,212 units in January, from 113,894 units in the same month last year, according to industry figures.
SBI had a total balance sheet of Rs. 7,200 trillion (US$ 144 trillion) at the end of March 2008. The cheaper car loans will only be offered from February 23 until May 31 and would be reset to card rates a year from the day they are sanctioned. SBI currently offers car loans for up to seven years. The lender expects an additional Rs. 1,000 crore from its new car loan portfolio as a result of the concessional interest rate.
SBI appointed sole booking agent for Tata Nano
SBI said it has been appointed as the sole booking agent for the world’s least expensive car, Nano, from the stable of Tatas. “SBI has been selected as the sole booking agent for Nano,” SBI chief general manager (Bengal Circle) J.K. Sinha said.
He, however, declined to comment on the details of the booking process for the much-awaited car, saying “details will be announced in the next 15 days”. Sources close to the development said the bank would start bookings at 100 branches across India.
The bank has already reduced interest rates on car loans for Tata vehicles. “We will give 0.25% below the card rate for all Tata Motors car buyers,” Sinha said. The bank has also decided to halve the processing fee for loans for Tata Motors vehicles. Government employees would also get further concessions on the processing fee, according to Sinha.
Meanwhile, SBI has also decided to reduce the interest rate to 8% for the first year on loans given to farmers against cold storage and warehouse receipts. It has already announced that interest rates on new housing loans would be frozen at 8% for the first year.
Its loans against cold storage and warehouse receipts to farmers were offered hitherto at a spread of 10.50-14.25%, depending upon the amount of the loan. The new 8% rate will be valid until May 2009. Loans under the new scheme would be offered to all farmers, including those who have not availed of credit from the bank so far for farming.
Source: Financial Express & Livemint