Banks offer cheaper loans for Tata Nano

Banks are offering cheaper loans for Nano in comparison to the regular fare of car finance. The banks which have been identified for providing finance for Nano are planning to offer discounted interest rates which have been inclined to 50 to 150 basis points (bps) lower than the regular car loan rates in view to gain benefit out of Nano euphoria and grow business in the process.

Bank of India (BOI), Canara Bank and Indian Bank to United Bank of India (UBI) everyone is trying to earn maximum share of the Nano financing pie by launching special schemes.

Till now Kolkata-headquartered UBI has launched the most exciting Nano financing scheme. Under the scheme bank will be offering loans at a low as 9% a year for purchasing the small car, the people’s car. The rate is robust 100bps lower than UBI’s card rate for car loans at 10%.

While the Chennai-based Indian Bank has secured its interest rate at 11% which is 75 bps less than its regular car loan rate. UBI and Indian Bank, both of them are offering car loans at a fixed rate. Canara Bank has set interest between 9.5-11.5% for varying tenures, whereas BOI is offering at 10.25-10.75% per annum.

Canara Bank chairman and managing director A.C. Mahajan informed that banks are able to offer a lower interest for Nano because the operational cost will be lower in case of Nano loans. Due to this there will be heavy flow in advances at one go. The CMD informed that banks will just have to refurbish the loans in the future.

Moving further the financials banks also have plans to make maximum gain in terms of Nano financing in order to gain importance.

UBI chairman and managing director S.C. Gupta informed offering loan at lower rates for Nano is not going to cost much to them. On the other hand by offering special scheme for Nano bank is hoping to get popular amongst customers.

However ICICI Bank the largest private bank is not likely to offer any different car loan rate for Nano customers. The ICICI Bank head for vehicle finance Ravi Narayanan informed that yet they have not decided a specific car loan product for the Nano. He added that there are all possibilities that bank rate for Nano loans might not vary from their regular car loan rates.

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

Tata Motors have signed an agreement with some 15 banks and non-banking finance companies for financing its latest offering. In fact, banks are trying their best to make use of this opportunity to make big gain in terms of car loan business as well as making its prominence.

On the other hand Canara Bank has decided to fix the interest rate at 9.50% for the first year of the loan for Nano. For the second year the rate will be 10.5% a year and third year and for the next four years of the seven-year-tenure it will be 11.5%. Captivatingly Canara Bank is offering other car loans for a maximum tenure of three years.

With an aim to attain high score on this front, BOI is planning a three-month freeze on interest and principal repayment for its existing customers. It will be charging a floating rate of 10.25% a year for repayment period less than 36 months and a 10.75% rate for 3-6 year loan tenure.