State-owned Punjab & Sind Bank has the lowest floating car loan rate in the market at 7.10%.

The rate is even lower at 6.80% for government employees who are maintaining a salary account with the bank. The state-owned bank also gives 100% financing for its existing customers who have availed a home loan from it.

“We have passed on the benefits of the reduced repo rate and the bank is also looking to grow the retail credit portfolio by focusing on auto loans,” said Ravi Mehra, Punjab & Sind Bank general manager of retail loans.

For new customers, Punjab & Sind Bank is financing 85% of the on-road price of the car. “No collateral is required. We just need hypothecation of the vehicle financed,” Mehra said.

Called the ‘Apna Vahan’ scheme, the bank has waived off all processing charges and there is also no prepayment charge. The equated monthly installments (EMI) for Rs one lakh works out to Rs 1,500.

With majority of the bank’s branches being in Punjab, Uttar Pradesh, Delhi and Haryana, the growth pockets for the car loans are also from these geographies.

Punjab & Sind Bank has a car loan book of Rs 1,419 crore. Though the coronavirus pandemic has affected the incomes of the people, many are preferring personal vehicles over public transport to guard themselves from getting infected. “Post lockdown, we are expecting a moderate increase in demand. Though the bank is financing all segments of borrowers, our prime focus is the salaried class,” said Mehra.

Kotak Mahindra Bank offers one of the cheapest car loans at 6.50%, but this is a fixed rate loan. The private sector lender’s loan-to-value ratio is 90%. Punjab & Sind Bank does not have a fixed loan product for the auto segment.

State Bank of India, the largest player in the auto loan market, has priced its interest rate at 7.50%. HDFC Bank, which is also a big player in the segment, charges 7.95% interest rate for auto loans. ICICI Bank, another major player, has priced its car loans at 7.90% to 8.80% for 36 to 84 months and 9.85% for 12 to 35 months.

For the commercial banks, the vehicle loans, which primarily consist of passenger cars, have reported an 11.7% growth to Rs 242,443 crore over the previous year, according to the latest Reserve Bank of India data. In the year-ago period, the car loans were growing at 8.6%.