Bank loans for Tata Nano will come cheaper

Bank loans for Nano will come cheaper compared to the regular fare of car finance. To make the most of the Nano euphoria and grow business in the process, Nano financiers are planning discounted interest rates -- which are tipped to figure at 50 to 150 basis points (bps) lower than regular car loan rates.

Whether its Bank of India (BoI) to Canara Bank and Indian Bank to United Bank of India (UBI), the story is the same. Everyone s eager to ride the bandwagon and maximise their share of the Nano financing pie with special schemes.

So far, Kolkata-headquartered UBI has lined up one of the most exciting Nano financing schemes. The bank has decided to offer loans at as low as 9% a year for purchasing the small car, which is being promoted as the people s car. The rate is a hefty 100 bps lower than UBI s card rate for car loans at 10%.

Chennai-based Indian Bank has pegged its interest rate for Nano at 11%, which is 75 bps lower than its regular car loan rate. Both UBI and Indian Bank offer car loans at a fixed rate. Canara Bank s interest rates will hover between 9.5-11.5% for varying tenures, while BoI will charge 10.25-10.75% per annum.

Banks will be able to offer a lower interest rate for Nano, as the operational cost will be lower in case of Nano loans, said Canara Bank chairman and managing director A.C. Mahajan. There will be a big surge in advances at one go. We will just have to service the loans in the future, the CMD explained.

Going beyond the fianncials, banks are also planning to score in terms of Nano financing to gain prominence. UBI chairman and managing director S.C. Gupta said: Offering loans for Nano at a lower rate would not cost us much. But, through the special scheme for Nano, we hope to make a mark with customers.

Nevertheless, ICICI Bank, the largest private bank, may not offer a differential car loan rate for Nano customers. We have not finalised a specific car loan product for the Nano as yet.

However, in all probability, our rate for Nano loans may not vary from our regular car loan rates, ICICI Bank head for vehicle finance Ravi Narayanan said.

State Bank of India, the exclusive booking agent for Nano, has also been silent so far on the issue of interest rates for Nano loans.

Tata Motors has entered into agreements with some 15 banks and non-banking finance companies for financing its latest offering. Apparently, banks are taking all these steps to avoid missing out on the opportunity to score big in terms of car loan business as well as publicity.

Canara Bank has decided to peg the interest rate at 9.50% for the first year of the loan for Nano. The rate will be 10.5% a year for the second and third year and 11.5% per annum for the next four years of the seven-year tenure. Interestingly, Canara Bank offers other car loans for a maximum tenure of three years.

To score high on this front, BoI plans a three-month moratorium on interest and principal repayment for its existing customers. It will charge a floating rate of 10.25% a year for repayment period less than 36 months and a 10.75% rate for a 3-6 year loan tenure.

Source : economictimes.com