PNB, OBC follow govt writ; cut rates on car and consumer loans

The government has got state-run lenders Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) to sharply reduce interest rates on auto and consumer durable loans days after it tied capital funding to state-run banks to cheaper consumer credit.

State-run lenders Punjab National Bank (PNB) and Oriental Bank of Commerce (OBC) on Tuesday cut lending rates on auto and consumer durable loans by up to 2.50 per cent ahead of the festival season.

Public sector banking major State Bank of India (SBI) also said it is looking at reducing rates on credit for the segments. SBI, however, ruled out any reduction in home loan rates.

PNB said it has reduced the rate of interest on car loans by over a percentage point to 10.65 per cent on fixed basis. For two-wheeler loans, the rate has been reduced to 12.25 per cent while rates on personal loans for purchase of consumer durables has been brought down to 12.75 per cent on a fixed basis.

PNB would offer loan up to Rs5 lakh for purchase of consumer durables and furnishing of the existing fully constructed house at fixed rate of interest of 10.50 per cent, it added.

PNB said these rates are 1 per cent to 2.50 per cent lower compared to the existing floating rates and that there would be full waiver of upfront fee and documentation charges.

In case of car loan, the bank will offer finance to the extent of 100 per cent of ex-showroom price of the vehicle.

The festival offer is valid up to 31 January, it said.

Similarly, OBC has reduced interest rate on commercial loans for four wheelers (both private and taxi cars) to 12 per cent from 12.25 per cent.

For personal loans and consumer durable loans OBC has reduced rates by 0.25 percentage points to 12.50 per cent for government employees and to 13.50 per cent for others.

The new rates would be effective from tomorrow (10 October), OBC said in a statement.

State Bank of India (SBI), the country's largest lender, also said it would reduce lending rates for car loans and consumer goods loans but ruled out any change in its already low home loan rates.

"Yes, we have received some communication from the government about what sort of retail lending we will look at for the next couple of months," managing director in-charge of national banking A Krishna Kumar said.

For SBI, whose NPAs hit 5.6 per cent in the April-June quarter, the strategy would be slashing interest rates on already existing products and not adding new ones, Kumar said.

Another state-run lender IDBI Bank offered to provide all retail loans, including home and auto loans, to new borrowers at base rate.

"As a festive season offer, we have decided to offer home and auto loans at base rate, which is currently 10.25 per cent," IDBI Bank said in a release.

The bank also decided to waive processing fees for both the loans during the period.

The government, which had in its budget for 2013-14 announced plans to infuse fresh capital into state-run banks, last week made it conditional for banks to reduce auto and consumer durables sectors cheaper to be eligible for such funding.

"I think what they are looking at is ensuring that people, especially during the festive season, are able to access loans for purchase of consumer goods and consumer durables to the extent that it is feasible," SBI's new chairperson Arundhati Bhattacharya said.

The decision to increase the quantum of capital infusion was taken at a meeting between

Finance minister P Chidambaram at a meeting with economic affairs secretary Arvind Mayaram and RBI governor Raghuram Rajan had, last week said he would ask banks to offer consumer credit at lower rates in order to stimulate demand and combat the slowdown.

In fact, the government has offered to increase the quantum of capital funding in order to enable banks to offer cheaper loans to buyers of cars and consumer durables.

"This amount (Rs 14,000 crore provided for capital infusion in Budget) will be enhanced sufficiently. The additional amount of capital will be provided to banks to enable them to lend to borrowers in selected sectors such as two-wheeler, consumer durables, etc at lower rates in order to stimulate demand," the finance ministry said last week.