Banks to woo customers with festive offers

Banks are betting big on the festive mood to make up for the slackness in loan growth so far, by waiving processing fees and even squeezing already thin margins. Higher interest rates are being offered on term deposits as well.

Bangalore-based Vijaya Bank is luring home loan customers by keeping its lending rate unchanged despite its recent base rate increase. It has pegged its interest rate on home loans at 10.75 per cent, nearly at par with its base rate of 10.65 per cent.

The public sector lender also launched a two-day ‘home loan mela’, where customers were to get 50 per cent concession on processing charges for on-spot sanctions. “We gave 165 in-principle spot loan sanctions on the first day. The amount sanctioned was about Rs 43 crore and we expect it to cross Rs 100 crore by the end of the two-day offer," said H S Upendra Kamath, chairman and managing director.

Banks are looking to boost credit growth, which has suffered due to high interest rates. Most of them have lowered their credit growth targets for the current financial year.

Another public sector lender, Union Bank of India, is planning offers on the same lines. “We are looking at introducing festive offers in deposits, as well as the lending side, around September-October. Usually, we introduce these offers around Diwali and then again up to New Year,” said S Govindan, general manager. It is to also launch a savings account mobilisation drive.

ICICI Bank, the country’s largest private sector lender, has also timed the launch of its fixed-cum-floating home loan scheme for the onset of the festive season.

Pune-based Bank of Maharashtra has come up with a festival bonanza for its depositors, offering them a peak rate of 9.35 per cent on a term deposit of three years. The bank said the scheme may continue till October-end and will be able to garner Rs 2,000 crore worth of deposits. These schemes come at a time when high interest rates on term deposits have already marred the growth of the low-cost current account and savings account deposits.

Banks are looking to economise their overall cost of funding by garnering deposits for a longer duration at relatively cheaper rates. “We have to pay interest of 9.15 per cent on borrowings through bulk deposits for three months. But, by offering marginally more, say an interest rate of 9.30 per cent on term deposits, we are able to borrow for a year,” said A S Bhattacharya, chairman and managing director, Bank of Maharashtra.

Banks had reduced their yearly business growth targets following slowing in credit offtake on account of increasing interest rates. The Reserve Bank of India has raised policy rates 11 times in the past 16 months, making funds dearer.