Bank of Maharashtra slashes retail lending rates by up to 40 bps

Faced with competition from fellow financiers, Bank of Maharashtra (BoM) has slashed lending rates on retail loans — home and vehicle — by up to 40-basis points. 

The revised rates are linked to borrowers’ credit score and come into effect from December 13. A S Rajeev, managing director (MD) & chief executive officer (CEO), BoM, said the bank has revised rates between 10 and 40 basis points that are linked to a person’s CIBIL score. 

“Many of the bank’s customers have savings accounts with us but have taken loans, especially for housing, from other financiers,” he said. 

The public sector lender will try to bring them back into its fold. The new home loan rate will be 6.4 per cent (against 6.8 per cent) for those with a credit score above 800. 

Competing lenders are giving loans at a rate between 6.5 and 6.8 per cent. The bank's housing loan portfolio is expanding by about 20 per cent year-on-year (YoY) and expects to grow at 25 per cent by the end of FY22, said Rajeev. 

The Pune-based lender’s outstanding home loans stood at Rs 19,112 crore as of September 2021.

Also, vehicle loans will be available at 6.8 per cent against the old rate of 7.05 per cent for those with a high credit score, said the bank. Its vehicle loan portfolio is small at Rs 1,844 crore as of September 30.

Asked about the impact of rate cut on net interest margin (NIM), he said the cost of funds is low at 3.44 per cent (September 2021) with current accounts and saving accounts (CASA’s) share of 53-54 per cent in total deposits. 

This gives room to pass on the benefit without much dent into NIMs. Its NIM was 3.27 per cent in Q2 of FY22.

Getting borrowers with high credit scores would help to reduce credit costs and enhance profile. The investment cycle is changing and the use of sanctioned credit limits by firms is on the rise. This will help see a 16-17 per cent growth in loans by the end of the current financial year, he said.

Its gross advances grew by 11.44 per cent YoY to Rs 1.15 trillion in Q2 of FY22 from Rs 1.03 trillion a year ago.