4 Oct, 2012, Atmadip Ray & Sangita Mehta,ET Bureau
KOLKATA/MUMBAI: You have heard of combo offers on pizzas, colas, FMCG goods, TV sets or even audio systems. Now, how about a combo offer on bank loans? Faced with a slump in demand for funds from corporates, public sector banks are stepping up the gas on retail loans with combo offers.
It is almost a retail loan mela, not like the one in the 1980s – associated with the then junior finance minister Janardhan Poojari – that nearly sank the system, but a voluntary drive by bank managements.
‘No processing charges on home loan if availed with car loan’ – screams a banner outside a UCO Bank branch. The Kolkata-based lender is rolling out standalone offers too: ’50 per cent off on processing charge on home loans’, ‘100 per cent off on processing charges on car loans’.
“We have noticed that a segment of customers prefers to take home and car loans together. We have lined up the combo scheme for them,” said UCO Bank CMD Arun Kaul. “The design of the scheme (is such that it) will not put additional stress on customers or the bank’s asset quality. In any case, we lend only after we are certain about a customer’s repayment capacity.”
Going to take a home loan from PSU bank? Get one for car free
UCO is not alone in pushing retail loans, hitherto the forte of private lenders such as HDFC Bank and ICICI Bank. State Bank of India and its associates, Union Bank and United Bank are also doing the same.
“The corporate pipeline is pretty weak for term loans, so we are trying to increase our coverage in the retail space,” said SBI CMD Pratip Chaudhuri. “No matter what the interest rate for the corporate sector, there is hardly any demand for term loans,” he added.
Industrial credit growth at an annual 16 per cent is the lowest in past 32 months as companies put on hold projects due to policy uncertainty. As many as 48 per cent of industrial segments reported a growth of less than two-thirds of the previous year, said Emkay Global in a report.
SBI, which recently lowered its base rate by 25 basis points to 9.75 per cent, has launched a series of offers to boost retail loans. It halved the conversion fee to 0.50 per cent and lowered the processing fee to Rs 1,000 for home loan borrowers shifting to the state-run lender from a competitor. The conversion fee is the charge paid by existing customers to shift to lower interest rates paid by new customers. SBI’s existing customers were also given the option to shift to lower rates for a nominal fee of 1 per cent of the outstanding loan.
“The idea behind being aggressive on home loans is that you can capture the full value chain of individual relationship and, therefore, cross-sell a whole range of products,” said S Mundra, executive director of Union Bank of IndiaBSE -1.05 %, which took the lead in lowering home loan rates in May.
In April, the government-the majority owner in state-run banks -instructed them to turn aggressive on retail loans. Financial Services Secretary DK Mittal told the chief executives of public sector players to make their rates competitive vis-a-vis private rivals. The move seems to have paid off.