SBI sees retail loan uptick after rate cut

Bank chief says car loan disbursement doubles PNB, Allahabad Bank cut auto, home loan rates

Following the reduction in interest rate for retail credit by large banks, demand for such advances was picking up, said Pratip Chaudhuri, chairman, State Bank of India (SBI).

SBI, which had reduced auto and home loans, has seen disbursements double following the rate cut. Lenders such as Union Bank of India, Indian Overseas Bank, Central Bank of India had also lowered their interest rates on home loans and car loans.

Punjab National Bank on Monday said it would now lower home loan rates to base rate, which stands at 10.5 per cent, from the earlier 10.75 per cent. It also reduced car loan interest rate by 50 basis points. Kolkata based-Allahabad Bank reduced retail interest rates and waived processing fees on retail loans. It has slashed home loan rates by up to 200 basis points and car loans by 25 basis points. The cut in interest rate by banks came after Finance Minister P Chidambaram appealed to banks to lower the rates to kick-start consumer loans.

“There has been a significant pickup in demand for car loans,” said Chaudhuri. “Earlier we used to disburse around Rs 550 crore of car loans a month. In August, we distributed close to Rs 1,000 crore despite a short supply from Maruti.” Home loan data would take some time to come, said Chaudhuri.

“We are now financing almost 1,800 cars per day,” Chaudhuri said on the sidelines of an event. Last month, SBI had announced a cut in interest rates on home and auto loans, immediately after the Reserve Bank of India announced a one per cent cut in the Statutory Liquidity Ratio during the first quarterly review of monetary policy.

SBI’s home loan rates stand at 10.25 per cent for advances up to Rs 30 lakh and 10.4 per cent for advances above Rs 30 lakh. It also slashed its interest rate on car loans by 50 basis points to 10.75 per cent across tenors. However, Chaudhuri said long-term credit demand from companies is almost nil. Whatever demand was there, it was very sporadic in nature. Long-term demand from companies has almost shifted in favour of commercial papers, the SBI chief said. “Corporate slowdown is definitely a cause of concern.”

Chaudhuri attributed the increase in non-performing assets (NPAs) in the first quarter to delayed payments by the government to various agencies. He expects NPA numbers to be better in second and third quarters with an improvement in tax collection figures by the government.

On his comments that cash reserve ratio (CRR) should be done away with, Chaudhuri said, “I’m happy that a debate has started; and any decision needs a big debate before it can be taken.” RBI Deputy Governor K C Chakrabarty has said in reply that CRR can’t be done away with. According to the RBI Act, Chakrabarty said, the central bank can’t pay any interest on CRR. In reply, Chaudhuri said: “Though people said ‘it can’t be done’, there has not been enough ground to say why it can’t be done?”

In a lighter vein, Chaudhuri said: “Constitutional amendments can always be done. Otherwise we would not have amended it over 90 times since 1950.” Rules need to be change in sync with times, he added.