Has the recent Reserve Bank of India dictate asking banks to stop the zero per cent EMI schemes and the rising prices of electronic gadgets put a dampener on your Diwali shopping? You may still have a chance of buying that iPhone 5 or the latest LED TV you have been eyeing.
With the Finance Ministry providing additional capital to public sector banks to facilitate rate cuts in the two-wheeler and consumer durable segments, some have already started doing so.
State Bank of India launched a ‘special festival loan’ for its salary package account holders for purchase of consumer durables and two wheelers. Loans under this scheme start from 12.05%. Similarly, Punjab National Bank cut two-wheeler loan rates to 12.25% and rates on consumer durable loans to 12.75%. Oriental Bank of Commerce has also cut rates for a limited period. Consumer durable loans are small ticket loans with a maximum tenure of three years and typically PSU banks offer it to their salaried customers or existing borrowers.
The cut in rates means that the differential between public and private sector banks and non-banking financial companies has increased substantially. The latter segments lend at the 18-20% for two-wheelers. Also, their personal loans start mostly from 13-14%. And they are not in a hurry to cut. HDFC Bank's Aditya Puri has already said that the bank will not reduce the rates on consumer loans as the rates are already competitive.
However, private sector banks and non-banking financial companies are major players in the consumer durable segment. SBI provides loans for consumer durables through its credit cards or through 'Express Credit' a loan product, says Krishna Kumar, Managing Director and Group Executive (National Banking).
But the advantage of private sector and NBFCs is that they approve loans faster and provide better servicing compared to public sector banks. That is, a public sector bank is likely to take a week to clear a loan whereas these players would do it in two-three days. Even for consumer durables, loans are extended against credit cards in the form of EMIs. Customers can pay the down payment using credit card and convert the rest of the installments into EMIs on the credit card.
NBFCs like Bajaj FinServe have their officials in retail stores, who process the document and do the due diligence, in less than an hour. So for customers, who want to walk into a shop and walk out with the goods, private sector banks and NBFCs make more sense. Harsh Roongta, CEO, Apnapaisa.com says that in case of consumer durables a slight decline in interest rates may not make much of a difference since the benefit for the customer will work out not more than Rs 50-60 per month. Also
“Consumer durables and two-wheeler loans are point-of-sales driven. In case of two-wheelers it may take a couple of days. Providing such loans require a certain level of expertise, which most of the PSU banks don't currently have,'' Roongta says.
However, if you are not a spontaneous buyer and are planning to purchase something a week or 10 days later, you could always opt for public sector banks.
With the Finance Ministry providing additional capital to public sector banks to facilitate rate cuts in the two-wheeler and consumer durable segments, some have already started doing so.
State Bank of India launched a ‘special festival loan’ for its salary package account holders for purchase of consumer durables and two wheelers. Loans under this scheme start from 12.05%. Similarly, Punjab National Bank cut two-wheeler loan rates to 12.25% and rates on consumer durable loans to 12.75%. Oriental Bank of Commerce has also cut rates for a limited period. Consumer durable loans are small ticket loans with a maximum tenure of three years and typically PSU banks offer it to their salaried customers or existing borrowers.
The cut in rates means that the differential between public and private sector banks and non-banking financial companies has increased substantially. The latter segments lend at the 18-20% for two-wheelers. Also, their personal loans start mostly from 13-14%. And they are not in a hurry to cut. HDFC Bank's Aditya Puri has already said that the bank will not reduce the rates on consumer loans as the rates are already competitive.
However, private sector banks and non-banking financial companies are major players in the consumer durable segment. SBI provides loans for consumer durables through its credit cards or through 'Express Credit' a loan product, says Krishna Kumar, Managing Director and Group Executive (National Banking).
But the advantage of private sector and NBFCs is that they approve loans faster and provide better servicing compared to public sector banks. That is, a public sector bank is likely to take a week to clear a loan whereas these players would do it in two-three days. Even for consumer durables, loans are extended against credit cards in the form of EMIs. Customers can pay the down payment using credit card and convert the rest of the installments into EMIs on the credit card.
NBFCs like Bajaj FinServe have their officials in retail stores, who process the document and do the due diligence, in less than an hour. So for customers, who want to walk into a shop and walk out with the goods, private sector banks and NBFCs make more sense. Harsh Roongta, CEO, Apnapaisa.com says that in case of consumer durables a slight decline in interest rates may not make much of a difference since the benefit for the customer will work out not more than Rs 50-60 per month. Also
“Consumer durables and two-wheeler loans are point-of-sales driven. In case of two-wheelers it may take a couple of days. Providing such loans require a certain level of expertise, which most of the PSU banks don't currently have,'' Roongta says.
However, if you are not a spontaneous buyer and are planning to purchase something a week or 10 days later, you could always opt for public sector banks.
Credits: business-standard
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