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Friday, December 03, 2021

To boost credit demand SBI lowers rates, widens tenure

The move has come at a time when several sectors are witnessing a slowdown, leading to production cuts, layoffs and subdued credit demand.

By: ENS Economic Bureau | Mumbai |
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Close on the heels of the Reserve Bank of India’s decision to slash repo rate by 35 basis points to 5.40 per cent, India’s largest lender State Bank of India (SBI) Tuesday unveiled festive season offerings for retail banking customers, including cheaper loans with added benefits like waiver in processing fees, pre-approved digital loans and loans with no escalation in interest rates, spread across various categories. The move has come at a time when several sectors are witnessing a slowdown, leading to production cuts, layoffs and subdued credit demand. Other PSU banks are expected to follow suit in a bid to boost credit offtake and consumption in the economy.

“SBI has waived processing fees on car loans during festival season. The bank is offering lowest interest rate starting from 8.70 per cent to customers opting for car loan, with no escalation in interest,” SBI said in a statement. For customers applying for a car loan online through the bank’s digital platform like YONO and the bank’s website, the lender is providing 25 basis points concession on interest rate, it said. “Salaried customers can also avail the loan up to 90 per cent of the car’s on-road price,” SBI said. Vehicle sales have fallen steeply with many companies announcing production cuts.

“SBI is offering personal loan up to Rs 20 lakh at the lowest interest rate starting from 10.75 per cent with the longest re-payment tenure of 6 years, reducing EMI burden on the customers. Additionally, salary account customers can avail pre-approved digital loans up to Rs 5 lakh through YONO in 4 clicks,” it said.


Banks aiming to arrest slowdown, push up growth

With the economy facing a slowdown and credit demand remaining subdued, SBI has taken the lead in offering loans at cheaper rates and other benefits in the festive season. Other PSU banks are expected to follow suit as the RBI has cut the repo rate by an unconventional 35 basis points, thereby making cost of funds cheaper for banks. Banks are aiming to boost the credit offtake and consumption to arrest the slowdown and push up growth.

The bank is offering education loan at rate of interest starting from 8.25 per cent for loan up to Rs 50 lakh and up to Rs 1.5 crore for studies in India and abroad. respectively. Customers will be offered the longest re-payment tenure of 15 years which effectively will reduce their EMI burden, it said. The package is expected to continue up to November. SBI had announced a reduction in its MCLR by 15 basis points across all tenors within hours after the RBI cut the repo rate by 35 basis points on August 7. With this, the overall home loan interest rate has come down by 35 bps since April 2019. “Currently bank offers cheapest home loan with interest rate of 8.05 per cent as repo rate linked home loan and this rate will be applicable to all existing and new loan from September 1,” it said.

With credit demand remaining subdued, public sector banks on Sunday kicked off an initiative to identify and finalise ways and means to increase credit to various sectors of the economy, enhance use of technology to bring about innovation and enable big data analytics.

SBI Chairman Rajnish Kumar on Sunday said credit demand remains subdued and there is a need for stimulus in the economy. Though lack of credit demand exists in the economy, there is no supply-side constraint as the public sector banks are more or less well-capitalised, he said. “Demand for credit in the economy is subdued. There is a need for stimulus in the economy,” Kumar said in Kolkata after attending the multi-level consultation programme with the branch managers of SBI in the region. “There is no supply-side constraint. More or less, the public sector banks are well-capitalised and bank rates also moderated,” he said.

The Department of Financial Services initiated the multi-level consultation process in all PSU banks even as the government proposed measures to boost lending to revive the economy which is facing a slowdown.

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