PSU Banks is likely to cut car loans and home loans, especially at public-sector banks. With North Block more than nudging them to help revive flagging consumption demand, state-run lenders controlling two-thirds of the market are pulling out all the stops to make retail borrowing more cost-effective.
According to Central bank data housing loans grew by a mere 1.4% this fiscal while consumer durable loans and vehicle loans shrank by 3.7% and 0.1%, respectively. Education loans have also fallen by 0.8% in the same period. However, there is no structural change in their costs with deposit rates still rather sticky, public sector lenders are expected to lower the marginal-cost based lending rates (MCLR). That might be reduced even at the expense of lower Net Interest Margin (NIM), but the key parameter for profitability, two senior bank executives said. Many lenders may follow market leader State Bank of India (SBI) in linking retail loans to an external benchmark, such as repo rate, helping consumers get the benefit of lower rates instantly. SBI has linked housing loans to the repo rate since July, which will give home loan borrowers at the country’s largest mass lender immediate benefit of 35 bps from the repo rate reduction on August 7.
Read EquityPandit’s Nifty PSU Bank Outlook for the Week