State-owned Oriental Bank of Commerce (OBC) today slashed interest rate on home and car loans by up to 1.5%.
Besides, the bank has also announced loyalty benefit of 0.25% on the card rate for existing customers with satisfactory track record.
"We have not only reduced interest rates for new customers but have decided to reward our esteemed customers by offering concessions on such loans," OBC Chairman and Managing Director S L Bansal said.
Loyalty benefit would be available to customers who have good repayment tack record for past 24 months. Depositors with annual saving account balance of Rs 1 lakh for a year will also get benefit of lower interest rate on loans.
As per the revised rates, interest rate up to Rs 30 lakh would be available at 10.50% or at the base rate for the existing customer effective today. The earlier rate was 10.90%.
"With the revision, an existing customer can get home loan at an EMI as low as Rs 980 per lakh," he said.
Besides, the bank has revised loan eligibility criteria and raised the tenure up to 25 years from earlier limit of 20 years so that burden on the borrower is minimised, he said.
Similarly, the bank has cut interest rate on vehicle loans to as low as 11.25%. It has also raised the maximum repayment period to 7 years from existing 5 years.
With the revised rate, the lowest EMI in vehicle loan would be Rs 1,752 per lakh, he said.
The rate has been revised downward to 11.25% to 12.65% for 3-year maturity, down 1.4%.
However, for maturity more than 3-year, the interest rate revision is as high as 1.65% including loyalty benefit.
"We have aligned interest rate to one of the best in the market," he said.
Talking about rationale behind rate revision in the retail segment, Bansal said, the bank intends to ramp up its retail business.
"This is part of our strategy to de-risk our balancesheet of bulk loan and expand our retail portfolio."
The retail portfolio comprising of home, auto, personal loans is 11% of the total loans.
During 2011-12, the bank's advances jumped by 16.74% to Rs 1,13,000. Of this, home loan was just Rs 5,290 crore while car loans portfolio was Rs 1,171 crore.
Asked if lowering of rates would have adverse impact on the net interest margin (NIM) of the bank, Bansal said it would not as there would be increase in volume.
The bank aims to maintain its NIM over 3% during the current fiscal.