SBI-Ola tieup: case of banking’s old dogs catching up with times1 min read . Updated: 18 Jun 2015, 06:11 PM IST
SBI in February decided to give loans to Ola cab drivers to buy their own car for just 10% down payment and 13% interest
Mumbai: The banking sector’s old dogs are learning new tricks and also coming up with new ones. The State Bank of India’s (SBI) agreement with radio taxi service provider Ola Cabs to provide loans to its cab drivers is a case in point.
The interesting part of the agreement is the loan repayment model that SBI has devised as part of its tie-up with Ola Cabs, a move that B. Sriram, managing director and group executive for domestic banking at India’s largest lender, talked about at Mint’s Financial Inclusion Conclave held in Mumbai on 17 June.
In February, the bank had entered into an agreement with Ola, wherein the bank decided to give loans to Ola cab drivers to buy their own car for just 10% down payment and 13% interest. The bank had promised to sanction loans in a day’s time.
In recovering these payments, the bank has come up with EDI or equated daily installments instead of EMI or equated monthly installments. The EDI amounts to ₹ 500-600.
The repayment is structured in such a way that Ola deducts about 20% of the amount of money paid every day to the driver for repayment of the car loan, while the rest is credited into the driver’s bank account, Sriram said. “This means that instead of going for monthly installments, we have ensured repayment happens on trips the driver takes every day," he said.
The model is working well for everyone, at least so far.
Ola’s drivers have access to credit, find it easier to manage cash flows and don’t have to worry about a lump sum repayment each month, and for the SBI, it means greater certainty about loan repayment.
About 1,000 drivers across four cities where the average ticket size is about ₹ 6 lakh have availed of the scheme, SBI officials said. The drivers are charged an average interest rate of 12.7-12.8%, they said.
The drivers also get a personal accident cover of ₹ 2 lakh and once-a-year free health check-up.