SBI offers personal loans to existing borrowers at housing loan rates

State Bank of India is offering a bonanza to its existing home-loan customers. They can take personal, or top-up, loans at the same rate that they are paying on home loans under a limited-period offer from the nation's top lender.

In effect, an existing borrower can take a personal loan at 10.15%, provided he had been paying his home loan EMIs on time. For women, this will be even cheaper at 10.10%. The rates imply a 0.35-0.40 percentage point cut in the top-up loan rates that SBI has been charging.


It charges 13.50-18.50% on personal loans to other customers. A senior SBI official, who did not want to be named, said the rate on top-up loans was lowered to boost the bank's loan book. "Also it is a safe bet for the bank to attract their existing customers with good track record to borrow from them rather than approaching its rival banks."

The rate reduction comes at a time when RBI has signalled a softer interest rate regime by cutting policy rates twice - both by a quarter percenta

Banks ask borrowers to wrap their personal loans, overdraft services

The banking sector, reeling under a rise in non-performing assets (NPAs) from the corporate sector, is seeking to hedge loans to individual borrowers. Increasingly, borrowers are being asked to buy insurance policies to cover their loans. “Covers with personal loans and overdraft facilities have gained traction in recent times. Both public and private sector banks are aggressively pushing these products to retail customers,” said a senior State Bank of India (SBI) official. According to Reserve Bank of India data, outstanding personal loan, without housing, consumer durables, credit cards, etc, stood at Rs 12,817 crore at the end of December.
Insurance industry players say at present, almost 30 % of personal loan borrowers are buying insurance covers. And, that is increasing at a fast clip. In comparison, the penetration in case of home loans is up to 90 %, mostly for loans between Rs 10 lakh and Rs 1 crore and around 75-80 % for an average education loan of Rs 4 lakh and above.
 Since personal loans are for a period of three-five years, the premium is not very high. Also, if the borrower purchases a group insurance policy, the premium is even cheaper.
“At a small cost, both banks and borrowers are assured of peace of mind,” said a public sector bank head.
The premium for a 35-38-year old is Rs 350-400 per lakh annually, if one takes the group insurance route. A single-premium policy for five years will cost Rs 1,500-2,000.
Says A S Narayanan, chief distribution officer at Bajaj Allianz Life Insurance, “Group mortgage covers are fast gaining ground. A lot of people are buying covers for personal and overdraft to avoid burdening their families in the event of their death.”
Group mortgage covers are mostly single-premium covers, especially for personal loans, as these are short-duration loans as opposed to housing loans. There are various options, such as a single-premium reducing cover, a single-premium level cover, and regular-premium reducing and level covers.
Reducing covers, as the name implies, decrease as the outstanding loan amount (principal borrowed) decreases over the loan tenure.
This results in a lower premium as the loan amount decreases. On the other hand, a level cover stays stagnant even if the loan amount decreases. “Some of these policies also have a money-back proposition where the buyer gets back a certain sum at the end of five years,” said a senior SBI official.
According to bankers, borrowers are being sold the covers under the proposition of ‘no headache to families, in case of an untimely death or even unemployment’.
“Borrowers are showing interest because if there is a default due to death, the family will not be pestered or will not be burdened with a loan,” said the retail head of a private sector bank.
Some banks have even made it mandatory to purchase a cover with a personal loan. In the case of some, the premium is included as part of the loan fee. However, a senior SBI official says since the central bank does not allow linking an insurance product with any loan, banks have to take a consent order from the customer before selling such bundled products.

SBI Diwali Offers On loans and Gold 2011

State Bank of India (SBI) has brought many exciting offers this Diwali to help you celebrate the festival of lights in a grand way. These include car loans, home loans and gold sale.
"We are offering the purest form of gold coins at competitive rates in the market. All coins will be available at 1% discount," SBI's (Patna Circle) chief general manager Jeevandas Narayan said at a press conference here on Saturday.
SBI gold coins are available in denominations of 2gm, 4gm, 5gm, 8gm, 10gm, 20gm, and 50gm to suit the demands of customers. Customers can avail discount on all these denominations till October 30, 2011 only. A total of 110 SBI branches in Bihar and Jharkhand will be selling gold coins this festive season.
"We will set up exclusive counters on 'Dhanteras' at all gold coin selling branches to deal with the rush of customers. These branches will be kept open till 9pm on Dhanteras day," Das said. Currently, 2gm gold coin (99.99% pure) costs Rs 5,965 and 50gm coin Rs 1.43 lakh. SBI aims to sell over 50kg of coins on Dhanteras.
The bank also has offers for those wanting to avail car loans. SBI Car loan at an interest rate of 11.25% per annum till the end of this year. It will charge no prepayment penalty and no processing fee for it.
SBI home loan (below Rs 30 lakh) SBI will be charging 10.50%, which is a concession of 0.25%. Among its other features are free personal accident insurance up to Rs 40 lakh and no prepayment penalty.
Jeevandas also announced the launch of Vishwayatra Foreign Travel Card (VFTC) for SBI customers who want to go on foreign tour.
"Customers who have VFTC will get dollars when they use it to withdraw money in the United States. They will get currency of the particular foreign country which they are in. Customers can get these cards at 14 different major SBI branches (where foreign exchange facility are available) in Bihar and Jharkhand," Das added.
SBI has installed four permanent Self Service Kiosks (SSKs) to make transactions easy this festive season. One SSK each has been installed at its branches at Gandhi Maidan, Kadamkuan, Telco Colony in Jamshedpur and Ranchi branch. SSKs will perform various non-financial transactions, including pass book printing.
The bank has also come out with offers for NRIs, under which they can open accounts with SBI at zero balance and also avail various other services.

Teaser loans: SBI for talking it out with RBI

Seeking to temper the highly charged-up discourse on the teaser loans and the bank's confrontational approach with the RBI, newly-appointed SBI Chairman Pratip Chaudhuri today said the bank will "engage" with the central bank to lower the higher-than-comfortable provisioning requirement.
"The current provisioning requirement of 2 % (on teaser loans) is a bit difficult for the bank when compared with the earlier 0.40 %," Chaudhuri said at his first media interaction at the bank headquarters this evening.
State Bank of India will "engage with the central bank" to solve the issue, as it does not want to take a belligerent stance against the regulator, he said.
"The current product offers enormous value to the customers, it has helped millions to own homes...as a final settlement we would like to have something which delivers value to the customers and also takes care of the regulatory concerns," he said.
Fearing troubles in repayment, RBI had increased the statutory provision coverage by five times to 2 % on the teaser loans -- launched first by SBI in days of high liquidity -- in the November policy review.
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SBI's peers, which after being critical initially had launched their own teaser rate products, have since then discontinued the offering while the nation's largest lender has persisted with the product.

Caution is key word at banks as NPAs fly

Banks’ non-performing assets have shot up nearly 30% at the end of calendar 2009 from a year ago due to stress in many sectors and farm loan waiver, indicating sharply lower profits for banks and possibility of curbs on exposure to sectors that have contributed to the bad assets.
In a reply to the Rajya Sabha, the government said the overall NPAs have increased to Rs 80,023 crore at the end of December 2009 from Rs 61,647crore at the end of December 2008, an increase of over 30%. “Banks will be more cautious towards lending to sectors such as real estate, exports and even retail loans,” says a senior banker with a private bank. A number of private banks have already curtailed their retail lending, specially personal loan.
A recent report by Fitch ratings on ‘banks’ restructuring loan portfolio’ pointed that restructured bank loan worth Rs 30,675 crore may turn bad in 2010-11 and further push up banks’ gross non-performing assets (NPAs) on an average by one percentage point.
State-owned banks, however, feel that the rising NPAs will not impact their profitability and that NPAs are minuscule as compared to the total advances.
“If you look at our figures, the gross NPAs are at 1.8% of our total advances. Besides, all banks have been making provisions for these loans, which have been reflected in third quarterly results. There will be some caution but it’s not over-exercised,” said CGM Punjab National Bank, RIS Sidhu.
The bank reported a flat 1% increase in the net profit to Rs 1011.31 crore for the third quarter of this financial year.
Country’s largest lender, State Bank of India (SBI) also feels that increase in NPAs would not result in lending curbs. “There are no indications that loans to a particular sector has totally gone bad. Every sector has reported bad assets and there seems no reason to stop lending to any particular sector,” said chief financial officer SBI, SS Ranjan.
Incidentally, the gross NPAs to gross advances for the public sector banks has also shown an increase of 0.27% as compared with last year.
In a move that could put more pressure on PSBs, the government has allowed an extension for loan repayments to large farmers under the Agricultural Debt Waiver and Debt Relief Scheme. The total amount under the one time settlement (OTS) for large farmers is estimated at Rs 10,000 crore.