Banks lower rates on personal loans Seek To Attract ‘Good’ Customers To Counter Slowdown In Corporate A/c

Chennai: In an effort to grow their lending books, many banks are now offering lower interest rates on personal loans. With the slump in auto sales continuing and certain real estate markets showing signs of sluggishness, coupled with corporates shying away from major expansion, banks are looking at new segments for growth.     According to Sumit Bali, executive VP, Kotak Mahindra Bank, the book on the retail side has ticket sizes that are "small and delinquencies less". "Banks are targeting select 'good' customers from their existing base for personal loans at aggressive rates," he said. For these customers, Kotak's rates can go down to 13.5-13.25%.      The personal consumption segment — home loans, car loans, personal loans and credit cards — is holding up despite the slowdown, a comeback after 2008-09 when unsecured loans had completely skewed the market and many lenders burnt their fingers. "Since then, lenders have become wiser and there are many more firewalls to prevent a repeat," said Bali. "There is not much stress of delinquency."      The risk factor becomes even lower when the loan is offered to a preferred customer with whom the bank already has a relationship through another loan or a long-standing account and whose credit history is impeccable. Hence the lower rates, say sources.      Some time back, HDFC Bank too sent mailers to its elite customers with attractive offers on personal loans. Accordingly, those who have a takehome salary of over Rs 75,000 per month can avail a minimum loan of Rs 10 lakh at reduced interest rates, ranging between 12.99% and 14% per annum on a reducing basis. The bank's personal loan portfolio grew by 26% to touch Rs 17,500 crore during 2012-13 as compared to Rs 13,891 crore during 2011-12. This has now moved up to Rs 19,314 crore as of September end of this fiscal.      Federal Bank is offering overdraft facilities to salaried account holders at an interest rate of 12.55%. "Under this scheme, the interest rate is just 2% above our base rate (10.55%) which itself is very competitive," A Surendran, generalmanager and head (retail), Federal Bank, said. Such customers can avail overdraft limits up to six times their monthly salary. Last month, as part of its festive offer, Indian Overseas Bank slashed its interest rate on consumer loans (mainly for purchase of durables) by 200 basis points to 13.5% from 15.5%. This interest rate offer is on till end of January. "The whole idea was to revive consumer spending in certain categories," M Narendra, CMD, Indian Overseas Bank, said.      Others like Karur Vysya Bank are not going in for a revision immediately. "The personal loan segment is still a high risk area. This segment also entails high cost of servicing in terms of repayment and loan recovery," K Venkataraman, MD and CEO, said.  OFFERING A BETTER DEAL      Banks' shift in focus follows the long-drawn sluggishness in auto sales and hiccups in some property markets      Problems have been compounded by cos going slow with their expansion plans, hitting credit offtake      For banks, the answer lies on the retail side as ticket sizes are small and delinquencies less