In order to bring its car loan interest rates in line with its competing banks, the country’s largest PSU (Public Sector Undertaking) bank SBI (State Bank of India) has decided to increase interest rates by 50 basis points. While the quantum of this interest rate hike is yet to be revealed by the bank, a senior official of the firm has already confirmed the decision of rate hike.
While speaking to the Business Standard, another official of the company said that SBI’s current rates are cheaper as compared to the other major players of this segment, and a hike of 50 basis points will not make bank’s product costly. He added that car loan is not a priority segment for SBI and the segment incurs higher per unit cost due to small ticket size and higher risk of defaults.
In the month of September 2011, SBI’s auto loan portfolio was at Rs 22,025, registering a considerable growth of 25.25 per cent over the same month preceding year.
While the largest private sector bank ICICI’s interest rates on car loans stand at 11.5-17%, the HDFC offers car loans at an interest rate of 11.5-12.25%. In comparison SBI has a lower interest rate of 11.25 percent for the segment.
