Public sector banks hike interest rate on FCNR deposits

Two public sector banks PNB and Dena bank have raised their FCNR and NRE term deposit rates after the announcement of an increase in interest rate ceiling by 50 basis points on non-resident deposits by the Reserve Bank of India.

Both the banks have increased rates by half a percentage points on non-resident deposit schemes across all maturities in dollar, British pound, euro and Australian and Canadian. The increase will be with immediate effect.

According to banks statements on the dollar deposits the interest rate has been hiked to 4.21 per cent for a maturity of 1-2 years from 3.71 per cent. For the maturity of 2-3 years, the rate has been revised to 3.52 per cent, as against 3.02 per cent.

While on the tenure of 3-4 years, the interest rate has been raised to 3.81 per cent from 3.31 per cent and on 4-5 years term deposit the new rate is at 3.95 per cent and the rate for fixed deposit for five years has been hiked at 4.14 per cent.

PSBs to give vehicle loans in ‘cautiously’ as pvt banks trim vehicle lending

Some of the private banks have stopped giving auto loans due to which consumers are finding difficulty as well as there has been significant fall down in the auto loans.

Public sector banks are coming forward to offer vehicle finance. Senior bank officials, car dealers and industry experts say that public sector banks are planning to increase their vehicle finance portfolios in a ‘cautiously aggressive’ manner.

Earlier private lenders were aggressive in the vehicle finance portfolio but due to increasing interest rates and delinquency levels, private banks, are moving forward in this sector cautiously. Senior bank official stated the genuine car buyers have been affected by this behavior of private sector lenders.

“Some private banks have decided to reduce their exposure to vehicle finance and we are trying to capitalize on this. However, we will adopt a ‘cautious but aggressive’ policy in order to ensure that we do not burn our fingers,” said Mr T.M. Bhasin, Executive Director, United Bank of India.

Mr Bhasin told Business Line that UBI has worked out plans to focus on vehicle finance in a big way during this festive season. “We are focusing on customers who have a salary-linked account with our bank. This will ensure that the loan extended is secure,” he said.

A senior official at the bank Allahabad Bank has a proposal of growing its car loan portfolio by 20 per cent in 2008-09. “There is a greater thrust on vehicle finance and we are looking at tying up with manufacturers,” he said. He further pointed out that as on September 2008 bank’s total vehicle finance portfolio stood at Rs 300 crore.

However a senior official at State Bank of India said that the bank is one of the large players in the segment and its portfolio increase is not related to the reduced exposure of private banks.

“We have been doing well in vehicle finance. Both our products and delivery system are moving down well with our customers,” said the official who did not wish to be identified.

The official stated that SBI is financing approximately one lakh cars each year and has plans to grow this by 33 per cent in 2008-09.

A senior official at Maruti Suzuki said: “Public sector banks have a wider reach and a long association with their customers. They therefore have the track record of their customers. This makes it easier to lend and also ensure that the customer does not default on his payments. Moreover, private banks lack transparency and have a multiple interest-rate structure which acts as a deterrent for some customers,” he added.

He told that Maruti Suzuki and SBI have a longstanding tie-up.

He further added that Maruti Suzuki has also tied up with SBI subsidiaries and is planning to tie up with Punjab National Bank.