[sbinews] Take a loan to party -An article from Telegraph on Festival Advance

  • From: "Rajendra S. Pai" <rs.pai@xxxxxxxxx>
  • To: <sbinews@xxxxxxxxxxxxx>
  • Date: Mon, 27 Sep 2004 10:30:55 +0530

Take a loan to party
Festival loans are the latest innovative products offered by banks, says
Chandralekha Tulal
I am so still in festival spirit, yet my purse ain't, oh well!" said someone
and unwittingly represented numerous other individuals who may find
themselves in a similar predicament.

Banks like the State Bank of India (SBI) and Bank of Baroda (BoB) have
become all too conscious about the problem which is why they have tossed up
an extremely innovative product - the Festival Loan.

The loan offered by SBI can be used for any kind of festival-related
expenses throughout the year. Bank officials clarify that individuals can
interpret the purpose of the loan based on their needs and even an
individual celebration like a birthday, marriage anniversary also qualifies.
The BoB loan is more flexible since it can be advanced for any use, except
for speculation.

The loan can be treated as a variant of personal loan; the lower rate of
interest and processing fee are the main attractions of the scheme.

BoB charges interest at 0.5 per cent over the benchmark prime lending rate,
currently at 10.5 per cent. Thus, the rate of interest works out to a mere
11 per cent. Again, SBI charges 2.5 per cent above the SBI Advance Rate,
which is 10.25 per cent, making it 12.75 per cent.

The 11 per cent rate charged by BoB is lower than the 12 per cent interest
charged on its personal loans. For SBI, the festival and the personal loan
rates are on a par. Still, both the banks' rates are far lower than that
charged by other banks for their personal loans and credit card companies.

Moreover, from October 10 to 22 and again from November 8 to 15, the bank is
offering a discounted rate on all its loans. During the period, the festival
loan rate will be as low as 11 per cent.

Any salaried employee with a minimum one year of service for BoB and two
years of service for SBI is eligible for the loan. A self-employed person
needs to have a minimum two years of stable business for BoB and three years
of experience for SBI to qualify for the loan. Any other person with a
verifiable source of income such as pension, interest from fixed income
investments may also take the loan.

Since it is an unsecured loan, special emphasis is given on checkoff
facility, whereby the employer deducts the EMI from the salary. Otherwise,
personal guarantee of the spouse or a person of adequate worth will be

For the BoB loan, there is also age specification, with the minimum being 21
years and the maximum for self-employed professionals being 65 years. For
salaried individuals, the tenure of the loan added with the age of the
individual should not exceed the retirement age of the person.

The loan limit is determined by an individual's income and repayment
capacity, with a minimum of Rs 5,000 and maximum of four times one's monthly
net income, subject to a limit of Rs 50,000. But for SBI, the loan amount
can extend up to Rs 1 lakh for salaried individuals provided they have
checkoff facility and well-established self-employed people with proven
track record of dealings with the bank. The tenure for BoB is 10 months
while that of SBI is 12 months.

The processing fee for both the banks is Rs 100, which although amounts to
two per cent of Rs 5,000 which is the lowest limit, it reduces as the loan
amount gets higher and is just 0.2 per cent for Rs 50,000. In case of SBI,
if any organisation approaches them for such advances to 50 or more
individuals, the fee is waived.

The loans do not carry any prepayment charges and an individual can pay off
the whole or a part whenever he has surplus funds.

Apart from the above two banks, State Bank of Travancore and State Bank of
Patiala also offers festival loans.

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  • » [sbinews] Take a loan to party -An article from Telegraph on Festival Advance