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May 4, 2001
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Money > Business Headlines > Report May 4, 2001 |
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PSU banks wage rate war in consumer loansBS Banking Bureau The public sector banks are now battling it out on a different turf. With corporates refusing to lift loans even at sub-prime rates, the focus has now shifted to the consumer loan segment, where fierce undercutting is on. Traditionally, banks charge around three to four per cent over their prime lending rates on consumer loans. Now the spread over PLR has come down to two per cent, said a senior banker. The average PLR of public sector banks varies between 11.5 and 12 per cent. The state-run banks have slashed interest rates across the board by around 50-75 basis points to build up retail portfolio, at a time when there are no takers for wholesale loans. "This is possibly the toughest period we have seen in recent times. We need to chalk out a strategy to combat the slowdown. Even in the consumer loan segment, borrowers are calling the shots," said a senior Bank of India executive. The Reserve Bank of India, in its April credit policy, has allowed banks to offer loans at sub-prime rates. However, despite the low rates there is no credit offtake, senior bankers pointed out. The corporates have adopted a wait and watch policy as they feel there could be another round of rate cut soon. The RBI had cut the bank rate by one percentage point to 7 per cent in two stages in February and March. The State Bank of India recently cut the interest rate on personal loans by 75 basis points while Canara Bank has cut it by 50 basis points. These loans are availed of by customers mostly to meet expenses like a wedding in the family, furnishing the house or for going on a holiday. However, most of them have left the processing fees, which averages around two per cent, unchanged. "The interest rate charged by our bank on personal loans is amongst the lowest in the country. The general trend is that there is a bias towards softening of interest rates in the segment so that the offtake is good," a senior SBI official said. Powered by YOU MAY ALSO WANT TO READ:
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