SBI Announces Car Loans At 8% In India

The interest rate on car loans has dropped to 8% with the country’s largest lender State Bank of India launching a special scheme.

Under the scheme, auto loans will be offered at a fixed rate of 8% for the first year and 10% for the next two years. For the remaining years of the loan, borrowers will be charged an interest of 25 to 75 basis points below the bank’s prime lending rate.

In February this year, the bank had launched a scheme where the interest rate was fixed at 10% for one year. Loans worth Rs 1,200 Crore were sanctioned under this scheme.

The new offer, announced on Saturday, will be effective from July 1 — SBI’s foundation day — and will be valid till September 2009. The successful applicants for Nano, the Tata small car, will be among the immediate beneficiaries of the new offer.

For a loan of Rs 1 lakh, the equated monthly installment (EMI) will work out to Rs 1,559 in the first year and Rs 1,647 in the second and third year. Most auto loans are between three and five years, and a few up to seven years.

The rate cut by SBI could prompt other lenders like ICICI and HDFC bank to review their lending rates. Axis Bank is likely to review its rates on Monday. “We have reduced our loan rates by 30-40 basis points to around 11.25%. If there is a policy action which results in lowering of our interest costs, we will pass it on to the customers,” said Sumit Bali, CEO, Kotak Prime.

The spread on the floating interest rate that will be applicable from the fourth year will be spelt out to a borrower the day she takes the loan. Currently, SBI’s car loan rates are 25 to 75 bps below the bank’s PLR of 11.75%.

Thus if a borrower takes a five-year auto loan from SBI on July 1, the floating rate on the fourth year will be 50 basis points lower than the bank’s PLR at that point. Since February, SBI has waived the processing fee on loans and is also providing free accident insurance cover for loan outstanding up to Rs 40 lakh.

[Source: ET]

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5 Comments on SBI Announces Car Loans At 8% In India

SBI Announces Car Loans At 8% In India on Sun, 28th Jun 2009 4:52 pm

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