Banks scramble to cash in on festive demand for retail loans

Tags: Banking

Organise property expo, launch combo offers, cut processing fee to pep up demand

Banks are hosting property exhibitions, introducing combo products that offer further interest rate reduction on a car loan if a customer has already taken a home loan and are sugar coating home loan products, besides cutting interest rates and waiving processing fees to pep up demand for home and auto loans for second half of 2012-13.

Several banks such as Axis Bank, Central Bank of India and Corporation Bank are organising property exhibitions to sell more home loans, while a host of banks have launched combo offers where a home loan customer gets an additional 0.25-0.5 per cent interest rate reduction on an auto loan.

Axis Bank, which has co-organised MCHI-CREDAI’s 20th Real Estate and Housing Finance Exhibition, is expecting to get Rs 200-250 crore of home loan business from the property expo, said Jairam Sridharan, head consumer lending and payments, Axis Bank to Financial Chronicle. As many as 15 lenders have set up their stalls to offer spot loans in the MCHI-CREDAI exhibition.

The four day MCHI-CREDAI exhibition at Bandra Kurla Complex in Mumbai is the country largest real estate exhibition featuring over 15,000 properties with over 120 developers participating.

On the same lines, Central Bank of India plans to hold realty exhibitions in 100 cities of the country by March 2013, and is looking to cloak a total home loan business of Rs 10,000 crore by March 2013. The bank will be holding expos and trade exhibitions in association with industry partners in the auto loan segment also.

MV Tanksale, CMD of Central Bank of India, said, “Home loan business would remain our prime focus. As on September 30, our home loan business touched Rs 6,800 crore, and by March 2013, we are targeting to add the business of Rs 4,000 crore. Hence, we can achieve the target of Rs 10,000 crore by end of this financial year.”

Adds Ram Sangapure, retail head, Central Bank of India, “The first property exhibition was organised in Mumbai, Goregaon, which was visited by 4,000 people, out of which, 580 people have applied for a home loan from us, amounting to Rs 180 crore. Our entire focus is on growing retail business now and hope to do an incremental business of Rs 6,000 crore to Rs 25,000 crore as on March 31, 2013.”

Central Bank of India has completely waived off processing fee on home and auto loans, besides launching a combo product where a home loan customer applying for an auto loan, gets a 0.5 per cent rate concession. Both home and auto loan could be given at the bank’s base rate at 10.5 per cent without processing fees in the combo product. The auto loans portfolio stood at Rs 900 crore as on date, which is expected to grow to Rs 1,200 crore by March 2013.

On similar lines, Corporation Bank is aiming to provide Rs 7,000 crore home and auto loans by March 2013, and is organising property expos across the country, offering home loans at base rate (10.5 per cent) with no processing charges. The bank has also launched a combo offer under which customers who take home and auto loan together will get an additional 0.25 per cent reduction on auto loan.

SM Swathi, general manager (Delhi circle), Corporation Bank, said, “From September till now, we have disbursed Rs 400 crore of home loans in property expos. The retail book is 17-18 per cent of the loan book, which we want to increase to 20 per cent by March end. The bank expects to achieve 40-48 per cent growth in retail portfolio, including home and car loans during the year.”

Meanwhile, the country’s largest lender State Bank of India (SBI) last month lowered its processing fee on home and auto loan by 50 per cent up to December 31. In case of home loans, the processing fee has been slashed to 0.125 per cent for loans up to Rs 25 lakh or Rs 1,000, whichever is maximum, compared with 0.25 per cent earlier. Similarly, for auto loans, the processing fee has been reduced to 0.255 per cent for all loan amounts, subject to a minimum of Rs 510 and a maximum of Rs 5,100. The processing earlier was 0.51 per cent. The bank has also announced a flat processing fee of Rs 1,000 for all takeover loans.

With a base rate of 9.75 per cent, SBI’s base rate is one of the most aggressive in the banking system at present. Already the bank has cut lending rates to a low of 10.25 per cent on home loans and 10.50 per cent for auto loans as part of a festive offer valid till the end of December.

According to A Krishna Kumar, SBI’s MD and group executive, the bank is seeing the number of daily home loans applications more than double since the rate cut to 800 from 400 applications (before the rate cut).

“The number of home loan applications have increased by two times, more than the daily average two months ago… We expect a growth of 18 per cent in retail home loans, which is a good growth. We are growing across (income) segments. The growth is coming mostly from smaller towns and cities,” added Kumar.

In this race to acquire new retail customers, ICICI Bank, the country’s largest private sector lender on Friday launched a home loan product with cashback offer. Available with immediate effect up to December 31, the product offers 1 per cent cashback on every equated monthly instalment (EMI).

ICICI Bank had launched a festival offer in the second week of October by reducing home loan rates up to 1 per cent. The new rates are at 10.5 per cent for loans above Rs 30 lakh and 10.25 per cent for loans up to Rs 30 lakh. The bank has also done away with a special slab of over Rs 75 crore floating rate loans under this scheme. The offer, which is on till the end of December, also reduces the processing fee by 25 basis points to 0.25 per cent. Additionally the bank is also offering a personal accident cover with every home loan.

Rising non-performing assets (NPAs) have made banks risk-averse, forcing them to concentrate on smaller retail loans, rather than a large loan to a single corporate account. Home loans are considered the safest and account for nearly half the total of the retail banking industry.

According to latest data by the Reserve Bank of India (RBI), home loans grew by 11.2 per cent year-on-year up to September 21 to Rs 4,21,300 crore. However, there was a spurt in the growth of auto loans with total outstanding at Rs 1,02,700 crore, growing at the rate of 22.2 per cent over the previous year, up from 19.3 per cent growth recorded last year.

The central bank in its second quarter review of the monetary policy last month end cut the cash reserve ratio (CRR) by 0.25 per cent to 4.25 per cent of their net demand and time liabilities.


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