SBI targets 33% growth in auto loans this fiscal, open to alliance

State Bank of India (SBI), the country’s largest lender, is targeting a 33.47% growth in its auto loans portfolio in this fiscal year compared to 48.1% growth registered in FY11.

“We are targeting a growth of Rs7,000 crore in our auto loans portfolio in FY12,” said a senior SBI official to DNA. As on March 31, 2011, SBI’s auto loan portfolio stood at Rs20,910 crore, recording a growth of Rs6,783 crore during the fiscal.

To lure borrowers, the bank is open for tie ups with auto companies to offer car loans at slightly cheaper rate of interest, the official said.

“If we go for tie-ups, it will be with companies such as Maruti Suzuki, Hyundai Motors and Tata Motors,” the official said. Banks usually tie up with auto companies to offer loans at a cheaper interest rate to customers for a limited offer period.

ICICI Bank, for example, is offering an interest rate of 9.98% for Nissan Micra till June 30, as compared to the regular rate of 12.25%.

The official confessed that in this fiscal the demand for auto loans has declined due to high interest rates when compared to FY11.

“The per month growth in portfolio used to be around Rs300 crore in FY11. Now, it is Rs275 crore every month,” the official said.

Currently, new car loans of amount less than Rs5 lakh and Rs5 lakh and above are charged at an interest rate of 11.5% per annum by SBI.

Till May the bank was offering these loans under its controversial ‘teaser scheme’ in which the bank was charging slightly lower interest rate from its customers for the first few years of loan re-payment.

SBI official said the slowdown in auto loans is apparent in the purchase of cars by the salary class which is sensitive to hike in equated monthly installments or EMIs.

“We are not seeing any rate sensitivity in the Rs7-8 lakh car loan segment. However, the Rs4-5 lakh car loan segment has been affected due to higher interest rates,” the official said. The official hopes that auto loan demand will pick up in the festival season.

SBI is also seeing a slowdown in home loan growth. “In a scenario where home loan growth is seeing a slowdown, it makes sense for a player like SBI to try and look at other retail segments (like auto loans) for some incremental growth,” said Nitin Kumar, deputy vice president, Quant Broking.