Has the recent Reserve Bank of India dictate asking banks to stop zero per cent equated monthly instalment (EMI) schemes, as well as the rising prices of electronic gadgets, spoilt your Diwali shopping plans? If so, you may still have a chance of buying the iPhone 5 or the LED TV you have been eyeing!
With the finance ministry providing additional capital to public sector banks to enable rate cuts in the two-wheeler and consumer durables segments, some banks have already announced lower interest rates. State Bank of India (SBI) has launched a ‘special festival
loan’ for its salary account holders to buy consumer durables and two wheelers. Under this scheme, interest rates on loans are upwards of 12.05 per cent. While Punjab National Bank cut two-wheeler loan rates to 12.25 per cent and rates on consumer durables loans to 12.75 per cent, Oriental Bank of Commerce has also reduced rates for a limited period.
Loans for consumer durables are small-ticket loans with a tenure of up to three years. Typically, public sector banks offer these loans to their salaried customers or existing borrowers
SBI provides loans for consumer durables through its credit cards or through loan product ‘Express Credit’, says Krishna Kumar, managing director and group executive (national banking).
For two-wheelers, private banks and non-banking financial companies (NBFCs) lend at 18-20 per cent interest, while interest on their personal loans are upwards of 13 per cent. And, these entities are not in a hurry to cut rates. HDFC Bank’s Aditya Puri has already said the bank wouldn’t reduce interest on consumer loans, as these rates are already competitive.
However, private banks and NBFCs have an edge in that these approve loans faster and provide better servicing compared to public sector banks. A public sector bank is likely to take a week to clear a loan, while private entities usually take two-three days. For consumer durables, these private entities offer loans against credit cards. Customers can make the down-payment using a credit card and pay the rest through EMIs on the credit card.
In their retail
stores, NBFCs such as Bajaj FinServe have officials who process documents and carry out due diligence in less than an hour. So, for customers who want to walk into a shop and walk out with the goods, private sector banks and NBFCs are more attractive.
Harsh Roongta, chief executive of Apnapaisa.com says in the case of consumer durables, a slight fall in interest rates may not make a substantial difference, as a customer wouldn’t benefit by more than Rs 50-60 a month. “Consumer durables and two-wheeler loans are point-of-sales driven. In case of two-wheelers, it may take a couple of days. Providing such loans requires a certain level of expertise, which most public sector banks don’t currently have,” Roongta says.
However, if you aren’t a spontaneous buyer and are planning to purchase a product in a week or 10 days, you could opt for public sector banks.