Petrol Stop - Axis Bank raises rate-war pitch with car loans at 9%

Axis Bank raises rate-war pitch with car loans at 9%

Tuesday, 22 September 2009

23 Sept 2009;economictimes.indiatimes.com:George Smith Alexander:MUMBAI: Axis Bank has become the new price warrior in the car loan segment. The third-largest private sector bank has slashed interest rates by Things to remember while purchasing a vehicle around 150-200 basis points in the past one month in select southern markets. The bank has started offering interest rates of 9% across all car models in Hyderabad, Chennai and Bangalore. It has also waived processing fees, and the rates are valid till the end of the month. SBI, in late June, had slashed interest rates to 8% for the first year and 10% for the next two years. For the remaining years of the loan, borrowers will be charged an interest of 25-75 basis points below the bank’s prime lending rate. However, unlike SBI, Axis rates are fixed for the tenure of the loans. Bankers feel that Axis Bank has turned more aggressive after Shikha Sharma, former head of ICICI Prudential, took charge as managing director a couple of months ago. Ms Sharma, however, does not share that perception. Axis Bank executive director Hemant Kaul said, "We only entered the market when rates were rational. By nature, we are not aggressive or irrational. We offer a marginally better interest rate to our own customers than new to the bank customers." The rate card of Axis Bank for internal customer is between 9.5-10% while for external customers it’s between 10.5-11%. However, the final rate for the customer would be lower depending on how much commission the dealer passes on to the customer and also on the back of various schemes offered by manufacturer. In order to get higher volumes, dealers pass on part of their commissions, which range between 2-2.5%, to customers, which reduces the final interest rate for the customer. Industry sources added that bank’s direct sales agents are offering interest rates of up to 8% for select dealers in these locations. These rates are being offered to customers of high-end vehicles like Toyota Fortuner, BMW and Mercedes Benz for the 3-5 years. However, bank officials are in a denial mode.