The Hindu Business Line : Banks go the whole hog to lend a helping hand

FROM a rush for car loans in Thailand to the birth of a market in mortgage-backed securities in China, banks across Asia have been scrambling to boost profits and spread risk by joining the global trend to target retail borrowers.

India has been no exception to this rule, as is made clear by the huge amount of money now sloshing around in the retail sector in recent times. No wonder then that the retail market should have touched the Rs 1 lakh-crore mark during financial year 2004, as unofficial industrial estimates indicate. Home loans formed the biggest chunk, nearly 50 per cent, of the total retail loan disbursements.

Auto, commercial, personal and two-wheeler loans were relegated to far lower positions in the loan account sweepstakes. According to estimates, auto loans constituted 20 per cent of the total retail loans, commercial 19 per cent, personal 10.5 per cent and two-wheelers, 3.5 per cent. The huge jump in retail loans has largely been attributed to the low interest rate regime that came into play from 2000.

In retrospect, one could see that it was 2003 that first saw the crash in interest rates applicable to housing loans, thanks to cut-throat competition among banks and institutions who wanted to undercut each other at the market place. From near 10 per cent per annum levels that existed at the beginning of the financial year, interest rates fell nearly 200 basis points to below 8 per cent levels.

`Retail' mantra for State Bank of India

With a view to meeting customer expectations, State Bank of India launched several new products during 2003-04, helping the Personal Segment (Retail) loans to increase by 36 per cent countrywide.

Housing emerged as a major thrust area and loans were offered at very competitive rates. In housing loans, there was a growth of Rs 4,893 crore in the year compared with a growth of Rs 3,973 crore in 2002-03. Housing loans as a percentage of retail loans improved to 51.47 per cent from 49.98 per cent in this period.

The number of cars financed by the Bank under the tie-up programme with the manufacturers grew by 117 per cent from 16,929 as on March 2003 to 36,786 as on March 2004. Retail lending has been at the forefront of credit expansion for State Bank of India and is expected to continue to contribute a major share in the growth of credit.

From housing finance to personal loans for individuals, crop loans to hi-tech agri loan for agriculturists, trade finance to loan for acquiring shops for traders, SBI offers a variety of loan products in the retail market.

In addition to the existing specialised Personal Banking branches and Commercial branches, the bank has opened Personal Banking Cells and Trade Finance Cells at different centres with a view to further fine-tuning the credit delivery system in the retail segment.

The following are brief details of the major loan products offered by the State Bank of India in Kerala.

Housing Loans

Loans are available to individuals for purchase, construction of houses and for repairing existing houses at fixed and floating rates with repayment period of up to 20 years. Interest rates are among the lowest in the market. There are no hidden costs involved. The loans come loaded with free accident insurance cover.

SBI Group life insurance company SBI Life offers optional life cover at attractive terms to home loan customers. Special packages are available for non-residents, employees of the State and Central Governments and public sector undertakings.

Auto Loans

Loans are available for purchase of four wheelers and two wheelers. State Bank of India is committed to ensuring fast processing and sanctions. It does not charge an advance equated monthly instalment (EMI) as some players do. Here again, interest rates on offer are among the lowest in the market.

Also, there are no hidden costs. It offers free accident insurance cover, too. As in the case of home loans, an optional life cover is on offer at attractive terms from SBI Life. There are special packages for employees of Government and public sector undertakings.

The bank does not charge any processing fee. The finance scheme is extended to cover vehicle registration charges, insurance and the one-time road tax. Special tie-ups have been forged with manufacturers and subvention benefits will be passed on to borrowers.

Personal Loans

The bank makes available general-purpose loans for individuals, based on income. Under this scheme, loans of up to Rs 5 lakh are sanctioned. It does not need furnishing of any security. Period of repayment can extend up to 48 months.

Special package are available for employees of public sector companies. The bank assures fast processing and quick sanction. Special loan packages are available for pensioners, too.

Plus Schemes

Under this plan, the bank has lined up attractive special schemes for different segments of individuals like doctors, teachers, the police establishment, Government employees and researchers at reduced interest rates.

SBI Shoppe

The bank makes available loans for purchase/renovation/construction/repairs of shops and showrooms available to traders on attractive terms under the SBI Shoppe scheme.

Ayurveda /Dhanwanthri Plus

Under the Ayurveda/Dhanwanthri Plus scheme, finance will be made available for setting up shops selling Ayurveda medicines from reputed manufacturers, and also for establishing centres for Ayurveda treatment and health tourism for attractive terms. Preference will be given to qualified doctors and reputed vaidyans.

Other schemes

Loans are also available on pledging of gold/gold ornaments, shares/debentures, Reserve Bank relief bonds, insurance policies and National Saving Certificates.

Products galore from Canara Bank

Canara Bank is one of the premier banks in the country, and epitomises a perfect blend of commercial and social banking.

The bank has already carved a niche in providing IT-based services and is also major player in the retail-lending sector.

Computerised branches, accounting for 65 per cent of the branches and 81 per cent of aggregated business, provide a wide array of services, such as networked ATMs, anywhere banking, telebanking and remote access terminals. It was one of the first among banks to launch networked ATMs and obtain an ISO Certification.

Canara Bank is in fact the first bank to have been conferred the FICCI award for contribution to rural development.

In Kerala, the bank has emerged as a leading player in retail lending. The following are the main features of a strong retail lending portfolio.

Housing Loans

The bank makes available loans for construction of house, purchase of land and house and repairs to house and also for adding an extension to the main unit. The maximum repayment period is 20 years (or up to 60 years of age of the customer).

Interest rates on offer start from a low of 7.25 per cent. Customers can exercise options from a choice of fixed and floating rates of interest. Interest is charged on a daily diminishing balance with no pre-payment penalty (except in cases of takeover by other banks). The borrower will also have the option of paying any amount at any point of time. No processing charges of any kind are levied.

A special housing loan scheme is now available for employees of the Government of Kerala, the Kerala Water Authority (KWA), the pubic sector Kerala State Electricity Board (KSEB), Kerala Agricultural University at attractive terms ad conditions, apart from low interest rates.

A credit card is issued free of charge for loans above Rs 2 lakh. Free accidental insurance coverage is available along with insurance for the house under a special arrangement with Unite India Insurance Company.

Similarly, an arrangement with Aviva Insurance Company obviates the need for dependants to be worried about repayment in the unfortunate event of death of borrower, if he happens to be covered under the optional `Loan Suraksha' insurance scheme.

Home Improvement Loans

Under this scheme, loans are available for furnishing of house, purchase of washing machine, refrigerator, air-conditioners and wardrobe.

In cases where a housing has already been availed of from the bank, interest charged will be as low as 7.25 per cent and in case of others, 10.75 per cent. The repayment option is available over a period of up to five years. The bank does not charge any penalty for pre-payment. Interest is charged on daily diminishing balance.

`Canmobile'

Canmobile is a financing scheme for purchase of vehicles. The margin to be made available upfront has been fixed at 10 per cent for four-wheelers and 20 per cent for two-wheelers. Interest rates applicable start from 11.50 per cent, are charged on a daily diminishing balance with nil pre-payment penalties involved. The repayment period available is 48 months for two-wheelers and 72 months for four-wheelers.

`Canpension'

This scheme provides for special care of the personal needs of pensioners. Loans of up to monthly pension for six months are available, which can be repaid over a period of 24 equated monthly instalments. Only simple formalities have to be got over with for availing of the loan.

Teachers' loan

This scheme makes available as personal loan an amount equivalent to six months net salary, up to a maximum of Rs 1 lakh. The loan would have to be repaid in 36 equated monthly instalments. The loan is available on simple terms and at attractive interest rates.

`Canmahila'

This is a novel scheme for uplifting of women. The loan can be availed of for any purpose such as purchase of household articles, jewellery, education of children or any personal or business purpose.

A clean loan of up to Rs 50,000 is available based on the income of women or their family member. There is no need to submit quotations, bills or vouchers. The interest rate applicable will be 11.50 per cent, and the repayment period up to 36 months.

`Doctor's Choice'

This is a new scheme for supporting a noble profession. Loans of up to Rs 10 lakh can be availed of under the scheme for setting up or modernisation of clinic, purchase of equipment, vehicle and medicine. There is also special discount available on interest payable.

Gold Loan for agriculturists

Instant loans up to Rs 1 lakh can be availed of from any branch of Canara Bank under this scheme at very attractive interest rates of 8.50 per cent for loans up to Rs 50,000. Loans are available at Rs 360 per gram of gold pledged. Only very simple formalities need to be completed for availing of the loan that features a repayment period extending to one year.

Special schemes for employees of institutions

The bank extends the option of formulating special schemes to suit the needs of employees, based on a mutual agreement, in cases where institutions/employers undertake to recover the loan directly from the salary of the employee concerned.

The loans will be charged at reduced interest rates, with other attractive conditions on tow. Only simple formalities need to be complied with.