Sbi Wakes Up To Smell The Business

The refusal of companies to lift funds and pre-payment of bank dues seem to have given a wake-up call to the sleeping giant. In a quest for customers, State Bank of India is set to take the fight to new private and foreign banks' camp. The objective is to snatch a piece of the growing personal banking business.

To start with, the bank is focusing on taking over housing loans from other established players (read Housing Development Finance Corporation and ICICI). If you want to shift from your existing housing loan company to SBI, for the interim period (while the paper work is on and the house is still mortgaged to the earlier company), you don't need to offer any collateral to SBI. It has waived that condition. What's more, SBI calculates the interest rate on its housing loan on a daily rest basis (compared to the yearly rest formula followed by HDFC and ICICI) and from January 5, there will not be any processing fee on housing loans taken from SBI.

 

In the first six months of the fiscal, SBI's housing loan portfolio has swelled by Rs 1,100 crore. The bank plans to build a Rs 3,000 crore portfolio this year. The rate of interest is at present pegged at 12 per cent, a tad cheaper than ICICI and HDFC loan rates. Even though this is a floating rate -- pegged to SBI's medium term lending rate -- branch managers are allowed to offer loans on a fixed rate basis.

The country's largest bank is also in talks with car manufacturers and dealers to offer cheap car loans to customers.

"So far, it has been offering vanilla car loans in select cities. Now the plan is to go across the country and offer cheap loans which is possible following the subvention route (where the financier which settles for a single digit loan rate but but gets compensated from the car manufacturer)," said a source. SBI's existing car loan portfolio is about Rs 300 crore.

The bank is also planning to offer loans against RBI Relief Bonds at its PLR (12 per cent), slashing it by a wide 3.5 per cent. Till recently, SBI was offering loans against Relief Bonds at 15.5 per cent.

To boost the personal loan segment, SBI is also putting in place the right mechanism for faster processing of loans against demat shares which has been traditionally a big no-no for most of the public sector banks. It has also recently kicked off its Internet banking and is in the process of setting up 1,000 automated teller machines (ATMs) across the country in uniform kiosks.

The personal segment is the latest thrust area for the country's largest commercial bank as this could be the only area of growth.

In the first four months of the year, it witnessed a massive dip in its corporate loans as blue-chip companies and oil PSUs started pre-paying loans. By September end, it had managed to swell the credit portfolio to the March 31 level largely on account of the growth in personal loans.