An interest rate of 28 per cent per annum (pa) for consumer/personal loan? Isn't this high? No, asserts Mr. Shyam Srinivasan, head, credit cards and personal loans, Standard Chartered Bank.
Launching the bank's new product, 'Smart Credit', a hybrid of credit card and consumer loan, Mr. Srinivasan justifies the interest rate on the ground that the new product offers flexibility that no other product offers. The interest clock will start ticking only from the moment a 'Smart Credit' holder avails the loan, he adds.
As far as the bank is concerned, it is an unsecured loan and risks attached to it are higher. However, it should be noted that the interest rate is lower than the credit card interest, which ranges around 30 per cent pa.
Overseas, the bank's parent company is also offering a similar product at an interest rate that is significantly lower than what it is in India. "Interest rate is a function of economy and we don't have control over that," he remarked.
Detailing the features of the bank's new offering, he says, 'Smart Credit' provides an open credit line equivalent to three times of one's gross monthly salary. In addition, 'Smart Credit' account gives the cardholder an ATM card compatible with the group's ATM network that comprises of Standard Chartered and Standard Chartered Grindlays.
In addition, a multi-city chequebook is issued to the customer to ensure 24-hour cash source. All this will come at an annual charge of Rs. 600.
On repayment, he says the customer can chose to pay as low as 5 per cent of the overdraft amount every month. Launching simultaneously in Mumbai and Chennai, Standard Chartered will soon introduce the product in Delhi and Bangalore. According to Mr. Srinivasan, the bank hopes to rope in round 5,000-6,000 accounts in the first year itself.
For Standard Chartered, the year 2001 is a happening one. "We have planned several new product launches and 'Smart Credit' is just one of them," says Mr. Srinivasan. Early this year, the bank introduced 'Sapnay' a mass-market credit card.
The merger of Grindlays Bank with Standard Chartered gives the latter an attractive business volume/customer base for new products. Already, Standard Chartered has earned the title of being the fastest growing credit card company in the Rs. 8,000-crore market. "Out share is nearly one-third of the total market," claims Mr. Srinivasan.
What is interesting to note is that the bank's delinquent ratio is around 6 per cent, significantly lower than the industry average of 8-9 per cent, said Mr. Priyadharshan Mangaokar, head, credit, consumer banking.
Standard Chartered is the market leader in the consumer banking segment that includes business lines like personal/consumer/credit card loans, demat operations, etc.
Meanwhile, the bank is not planning to add any more ATMs to its existing 60 machines. "It doesn't make economic sense. The issue now is to share the existing ATM network of the banking industry," opines Mr.Mangoakar.