State-run banks rush to cash in on pay commission salary hikes
Most state-run banks are looking to cash in on the salary hikes that central government employees will get in line with the 7th Pay Commission recommendations, which are expected to add ₹1.02 lakh crore to wages over 10 million employees.business Updated: Aug 02, 2016 11:43 IST
Most state-run banks are looking to cash in on the salary hikes that central government employees will get in line with the 7th Pay Commission recommendations, which are expected to add ₹1.02 lakh crore to wages over 10 million employees.
While the country’s largest bank, the State Bank of India has already announced discounted home loan products for government employees and defence personnel other state-run banks such as Bank of India, Punjab National Bank, Bank of Baroda, Bank of Maharashtra are expected to follow suit with similar schemes.
On July 29, the government said the August salaries for its employees would include a hike of 23.55%. Since the 7th CPC recommendations came into effect from January 1, 2016, the payroll for August would include arrears for the preceding seven months.
SBI on Monday launched the SBI Privilege Home Loan and the SBI Shaurya Home Loan, which includes lower EMIs after retirement and flexibility in selecting longer tenures such as extended repayment up to the age of 75 years, up from 70 years now.
Additionally, SBI will also offer a concession of 0.05% on interest rates, waiver of the processing fees and the option for other customers of other banks to switch their home loan’s outstanding balance to SBI.
SBI’s move is likely to force other banks too to look into the issue. “It is big pie and most banks will look at it to ensure that they too get some business,” said a finance ministry official.
Speaking to HT, a Bank of India executive said, “Since the pay commission payouts will bring in additional disposable income into our accounts, we will definitely want to tap it. Government accounts have better credit worthiness and their salaries are assured which gives us a better quality of customers. We already have pensioners’ products and will extend those and look at more special products packaged for government employees.”
Punjab National Bank MD Usha Ananthasubramanian said the wage revision will push retail credit which could go up by about 10-11%.
Source within Punjab National Bank (PNB) said that the lender is looking at a similar scheme though nothing is final at this point. “There is a great opportunity and this is being looked at but we are yet to come out with something concrete,” said a senior official of the bank.
The move is also expected to push rates down. SBI has already reduced its marginal cost of lending rate to 9.10% effective August 1, from the earlier 9.15%. PNB has also cut its base rate by 0.05% across various tenures. IDBI Bank too reduced its base rate to 9.65% from 9.75%.