COVID-19 has emerged as a ‘black swan event’ and will require extraordinary measures to bring back the much-needed economic growth. The situation has hit the Indian economy at a time when growth was lowest in a decade. However, there are signs of green shoots of recovery in the Indian economy.
The pandemic has significantly slowed down the business forcing financial institutions to take additional measures to remain relevant. Developing a flexible contingency plan equipped for crisis management is a prerequisite. The current challenges may translate into high capital infusion requirements for the Banks/FIs to maintain both regulatory capital as well as growth capital.
The Government of India and the RBI have provided an economic stimulus package shoring up liquidity and capacity on financial and compliance commitments. Financial institutions have taken responsive measures while providing financial support to retail and institutional customers with digital adoption of financial services.
The sensitive measures taken by Banks and FIs to ensure customer reliefs will be able to sustain growth and stability. Financial services players will emerge as stronger, more confident, and socially responsible institutions from this crisis.
Prominent Feature Of Retail Lending
The prominent feature of retail lending is that it is a volume-driven business. Further, retail credit business is widely dispersed to a large customer base unlike corporate lending, where the risk may be concentrated to a selected lot. Ability of a bank to administer a large portfolio of retail credit products depends upon such factors:
- Pricing at external linked benchmark rate for prompt passing on the benefits of market rates.
- Large service outlets all over India.
- Prompt delivery of credit ensuring quick turnaround time.
Retail credit is technologically intensive in nature, because of its large volume and the need to provide instantaneous service to the customer base. Thus, faster processing and robust database are essential. Moreover, in the midst of COVID-19, banks are leveraging digital channels to reach out to customers efficiently. PNB has a vast delivery network of 10,931 general banking branches and 135 PNB loan points across India to serve the varied credit needs of customers. PNB has always been providing the customers the best of services and has received recognition at various levels.
PNB Home Loan
As we know that in October 2019, RBI mandated that all new, retail floating rate loans have to be linked to external benchmark repo linked lending rates (RLLR), to make interest rate transmission more transparent and faster.
Consequently, multiple cuts in repo rates by RBI over the past few quarters have also resulted in steep fall in lending rates of some banks, especially PSBs. However, interest rates of NBFCs/HFCs still benchmarked on their internal cost of funding, deprives their borrowers from immediate benefit of falling interest rates.
Currently, home loan borrowers with housing finance companies (HFCs) and non-banking lenders are a worried lot. Many public sector banks (PSBs) and private players have reduced home loan interest rates to a 15-year low. Loan switches are not new, but the clamour for the switch is gaining momentum in recent times as borrowers are facing liquidity stress due to pandemic.
With home loan EMIs accounting for a substantial portion of monthly expenditure, any reduction in outgo is a relief to the borrowers. PNB Home Loans offer one of the lowest starting interest rates in the market @ RLLR. For instance, floating rate interest on a PNB home loan starts from RLLR presently 6.80% p.a. As the interest rates are linked with Repo Rate, whenever there is a change in interest rate, there will always be a surge in shift because customers know that the new benchmark of RLLR is transparent and beneficial. Punjab National Bank is transparent and prompt in reduction of rate of interest (ROI) as per RBI’s directions. Amount saved is amount earned: 1.70-2.00% savings on the residual balance of loan for 15-20 years could offer huge savings.
Punjab National Bank was one of the first banks to launch ‘Festival Bonanza Offer’ to push the subdued loan demand due to COVID-19. This offer provides benefit of zero processing and documentation charges for the retail products namely PNB Home Loan, PNB myProperty Loan (loan to individuals against mortgage of immoveable property) and PNB Car loan.
PNB offers a variety of home loan schemes at competitive interest rates presently starting from 6.80%. With repayment tenure upto 30 years, women applicants are eligible for special concession on interest rate of 0.05%. On account of Festival Bonanza Offer, processing and documentation charges are waived off till March 31, 2021.
Some of the housing loans offered are: PNB Max Saver, PNB Gen-Next Housing Finance, PNB Pride Housing loan.
Housing Loan for Public
- There is no cap on the need-based loan with maximum loan amount subject to maintenance of the prescribed Loan to Value (LTV) ratio
- Purpose is to meet the financial requirement of individuals to construct/purchase new/old house/flat/plot and to carry out repairs.
- Maximum repayment period is 30 years
- Can be availed by individuals/group of individuals having assured source of income, viz. salaried employees, professionals, self-employed persons, businessman, farmers etc.
Housing Loan for Gen-Next
- Providing housing finance to gen-Nnxt salaried class borrowers such as IT professionals, PSBs/PSUs/Government employees upto the age of 40 years
- Eligible loan amount is 1.25 times of the loan amount calculated as per regular housing loan method subject to maintenance of prescribed LTV ratio.
- There is no cap on the maximum loan amount and it is subject to maintenance of the prescribed Loan to Value (LTV) ratio
- Maximum repayment period for the loan is 30 years
PNB Max Saver
- Home loan in the shape of overdraft which allows beneficiaries to deposit their surplus funds in the overdraft account, which saves interest burden and also allows liquidity to the borrowers.
- The present outstanding of the loan amount is taken into consideration for conversion of the loan
- Existing home loan borrowers can also convert their loans under this variant
PNB Pride Housing Loan
- The scheme provides availability of housing loan at attractive rates to all permanent employees of Central/State Governments/fefence personnel and paramilitary forces - individuals or joint owners.
- Need based loan be sanctioned depending upon the repayment capacity and LTV
Making affordable housing a reality
PNB is one of the flag-bearer PSBs to carry Government of India’s scheme for making affordable housing a reality. The bank offers housing loan for purchase and construction of house to individuals from economically weaker section (EWS), low income group (LIG), and middle-income group. The loan is provided through the credit-linked subsidy scheme (CLSS) under Pradhan Mantri Awas Yojana (PMAY). The interest subsidy is available at rates which range from 3% p.a. to 6.5% p.a. depending on the category. The table below highlights the details under CLSS.
PNB actively promotes affordable housing through Government’s flagship scheme PMAY to the eligible beneficiaries. These government initiatives will bring about revival in the housing sector and will impact the economic growth as industries heavily depend on it.
As India adapts to digitisation and moves forward in both the banking institutions-level as well as at the customer-level, the new normal for retail loans is transparency, trust and efficiency of appraisal, focused monitoring of accounts and delivery within a prescribed turn around time (TAT). PNB retail loan portfolio has been designed by adapting to this new normal with greater use of technology and reduced operational hurdles and it will certainly boost the Indian economy with wider participation of its customers in the financial sector.
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