SBI Cut rates on car loan to 10% from 11.5%

This is the news for which lot of car buyers are looking. After cutting its home loan rate by almost 3 percentage points to 8%, the country’s biggest bank, State Bank of India has cut its car loan rate from 11.5% to 10% under the floating interest rate scheme. It also announced cuts of up to 6.5 percentage points in rates to farmers against their produce, bringing the new rate to 8%.

The reduction in the car loan rate should act as a major boost to the auto industry. “As SBI is the leader in the car loan segment, other banks will be forced to follow suit to remain competitive,” said a public sector bank chairman.
The new offer, a senior SBI official said, would be open between February 23 and May 31, 2009. After that, the rate would be reset to the then prevailing rate on car loans. The official said that at present the bank was offering car loans at 11.5% in the normal course. As the PLR of the bank is 12.25%, the present floating rate on car loans is 75 basis points lower than the PLR. After one year, the interest rate on the car loan borrowed today at 10% will be reset at the then prevailing PLR minus 75 basis points.