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HindustanTimes Wed,16 Apr 2014

Flush with funds, banks set to rain frills on loans

Sachin Kumar, Hindustan Times  Mumbai, August 02, 2012
First Published: 23:33 IST(2/8/2012) | Last Updated: 03:12 IST(3/8/2012)

Banks may not be in a hurry to slash your loan rates yet, as the Reserve Bank of India is yet unyielding on policy rates, but they are set to launch new schemes that will offer discounts on retails products such as home and auto loans.

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With a one% point cut in Statutory Liquidity Ratio (SLR), the share of bank deposits that must be parked in government bonds or gold on Wednesday, banks will get an additional Rs. 63,000 crore.

"In order to ensure productive use of additional liquidity available from SLR cut, banks may come up with new schemes having some incentives to attract new customers," said JP Dua, chairman, Allahabad Bank.

Bankers said the incentives could include lower processing and documentation fees and discounts on home loan insurance.

SBI has already passed on the benefit to the customers by reducing home and car loans. http://www.hindustantimes.com/Images/Popup/2012/8/03-08-12-biz-01.jpg

The SLR cut will release an additional Rs. 10,000 crore for SBI alone.

"Banks may run schemes with offers for a limited period. Once the additional liquidity is absorbed, the schemes will come to an end," said Abraham Chacko, executive director, Federal Bank.       

He said large banks may take the lead in launching such schemes as they will get comparatively more money because of their large deposit bases.

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