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The pandemic has disrupted the flow of credit and is also expected to lead to a surge in bad loans as people’s ability to repay loans have declined in the last few months. REUTERS/Mukesh Gupta/File photo (REUTERS)
The pandemic has disrupted the flow of credit and is also expected to lead to a surge in bad loans as people’s ability to repay loans have declined in the last few months. REUTERS/Mukesh Gupta/File photo (REUTERS)

Big banks look to cash in on festival demand as credit stagnates

  • Large banks like ICICI Bank, HDFC Bank and SBI have over the last few days announced cheaper loans, waiver of processing fees and easier consumer finance loans

MUMBAI: In an attempt to resuscitate credit flow and nudge demand during the upcoming festival season, lenders are offering a wide gamut of relaxations to customers.

Large banks like ICICI Bank, HDFC Bank and State Bank of India (SBI) have over the last few days announced cheaper loans, waiver of processing fees and easier consumer finance loans. Bankers said lack of demand has also led to credit growth wilting so far in the financial year and even on a year-on-year (y-o-y) basis. In fact, on a year-to-date (ytd) basis, outstanding credit has shrunk 1.54%, showed data from the Reserve Bank of India.

For instance, HDFC Bank on Wednesday launched its festival offer and said customers can avail of deals on all banking products from loans to bank accounts. The bank will also offer a 50% discount on processing fees on auto loans, personal loans and business growth loans and zero processing fee on two-wheeler loans.

“Our partners include both the merchants and manufacturers. Everyone in the economy is hoping for a turnaround and some optimism," said Aditya Puri, managing director, HDFC Bank.

Puri said most industries have come back to pre-covid business level.

“If you talk to the automobile, steel, fast-moving consumer goods (FMCG) industry and others, the growth is pretty good. Yes, there are some sectors that will take a little. We are confident about the future," said Puri.

Another private sector lender ICICI Bank on Wednesday said it will offer attractive benefits to retail and business customers on various banking products and services. Some of these include home loans and balance transfer of home loans from other banks at interest rates starting from 6.9%, along with offers on car, two-wheeler and consumer durable loans.

“With this, we believe that our customers will get the best-in-class offers to celebrate their festivities, even while they are indoors or maintaining safe distancing," said Anup Bagchi, executive director, ICICI Bank.

The pandemic has disrupted the flow of credit and is also expected to lead to a surge in bad loans as people’s ability to repay loans have declined in the last few months. However, some believe there is a gradual pickup in credit demand as things start to stabilise. Credit bureau TransUnion Cibil said that inquiry volumes for home loans, although still below January and February 2020, were back to the same levels seen during the same time last year in July and August.

“This could possibly be due to lenders completing the pending transactions that had been halted at the onset of covid-19, and consumers seeking to transfer their existing home loans to lenders offering better interest rates consequent to rate cuts announced by the regulator," it said in a report on 22 September.

When a consumer applies for a loan, the lending institution seeks credit information report and this process, also known as inquiry,is useful in gauging demand.

India’s largest lender State Bank of India on 28 September announced a complete waiver in the processing fee for all customers applying for car, gold, and personal loans through Yono, its mobile app. SBI also said it would waive off processing fees on home loans in approved projects.

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