The Hindu Business Line : Banks roll out red carpet to Govt employees, PSU staff

Private sector job losses and stagnating salaries are propelling banks to go after the best bet to inflate their auto lending portfolio — Government employees. With a shaky job market, pink slips and salary cuts threatening the private sector employees, this category seems the more stable option for dishing out loans.

Over the last two-three months, car makers have been offering high discounts to Government employees. Now it’s banks that are looking at this customer base to de-risk themselves from possible defaults in this uncertain economic scenario.

HDFC Bank, Punjab National Bank and State Bank of India are either offering lower interest rates to Government employees, waiving off their processing fees or sanctioning a higher loan amount. Others targeted for quick loans are those with additional income or surplus cash.

Recently HDFC Bank, the largest private financier for auto loans, has lowered its interest rate by 50 basis points, especially for Government employees.

“Right now, Government employees are the safest bet. Those who are self employed are seeing a dip in their incomes. Private sector employees are facing retrenchment and stagnation in their salaries,” said Mr Rajan Pental, Senior Vice-President, Auto Loans, HDFC Bank.

Additional criteria

Banking officials say that to prevent defaults when sanctioning a loan, they are looking at additional criteria.

A customer’s substantial net worth or alternative income would dip the scales in his favour as he would be in a better position to pay up the equated monthly instalment.

“The Government employees have received their arrears. With higher pay scales now, they have surplus cash to buy cars,” said Mr Sujjan Sinha, Senior Vice-President, Retail Banking, Axis Bank.

“While banks provide 70 per cent finance on the loan amount for private sector employees, public sector staff can avail themselves of as much as 80 per cent. Some banks are even waiving off the processing fee,” said Mr S.P. Shah, President of Federation of Indian Automobile Dealers Association.

Related Stories:
Special discounts to Govt staff lift Maruti, Hyundai sales
Income uncertainty turning potential car buyers away
Carmakers offer discounts to clear stocks at retail end

More Stories on : Automobiles | Consumer Finance | Strategy

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