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Old 2nd September 2013, 14:00   #16
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Default re: Earn at least 6 Lakh / Year for an SBI Car Loan

This is what happens when banks don't do their due diligence on every case properly but generalize and say if I earn so much I can afford to pay. I know people earning 25K a month who are saving money and conversely people earning 75K a month who are in high debt
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Old 2nd September 2013, 14:44   #17
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Default re: Earn at least 6 Lakh / Year for an SBI Car Loan

I don't see anything wrong with the decision from SBI's point of view. Their audits must be suggesting that consumers with family income of less than 6LPA have higher default rates and hence they have come up with this measure in such difficult times. At the end even they want to do a better business.

Note that it is "Family" income and not just individual income. Which seems inline with the current market situation.

The only thing which seems over done to me is the service charge of 0.51% of the vehicle's cost.

Best,
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Old 2nd September 2013, 15:02   #18
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Default re: Earn at least 6 Lakh / Year for an SBI Car Loan

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Originally Posted by pganapathy View Post
This is what happens when banks don't do their due diligence on every case properly but generalize and say if I earn so much I can afford to pay. I know people earning 25K a month who are saving money and conversely people earning 75K a month who are in high debt
True, but banks like the SBI relies heavily on written rules than doing analysis on a case to case basis. SBI is a remnant of the socialist era, which is skewing the fee market of modern India. Hope we get out of the sarkari obsession and give a burial to the beloved "banker to every Indian".
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Old 2nd September 2013, 17:47   #19
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

They should have first addressed the realty sector as this is where all black money of builders is being converted into white, for an apartment not even worth INR 10lakhs they quote prices like 40-60 lakhs in Bangalore, most buyers are from working class who end up repaying EMI's for their lifetime. Realty sector is actually eating up all hard earned money of working class and banks should tighten up this sector rather than targeting auto industry. Evident clearly is the lobby of builders over industrialists atleast here.
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Old 2nd September 2013, 18:11   #20
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

Considering today's entry level pay packages for professionals, a fresher would require atleast a few years to hit the 6LPA mark. Would people wait so long to buy their first car? This would make quite an impact in the hatchback segment, if in effect for the long term. Guess it would be a reasonably temporary measure given the current volatility and gloomy economic prospects.
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Old 2nd September 2013, 18:31   #21
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

By making a blanket policy like this, IMO SBI is being overly cautious. Let's take the case: someone wants to buy an alto 800 (loan of 3 lakh) and takes a 3 year loan, his EMI turns out to be Rs 9822 at 11%.
Pretty much affordable for someone single with 3-4 lakh package.
I can understand SBI's concern regarding NPAs , but by doing this they are giving up a sizeable chunk of their business.
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Old 2nd September 2013, 20:33   #22
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

The way I see it, the population that will be most hit by this rule is the taxi-cab industry. I bet almost all of them take loans to buy their cabs (unless owned by the cab operator) and proving a yearly income >6 lakhs could be a challenge for them.

Now, could this measure mainly be to cut out the fraud that is common when it comes to taxi-cab loans?
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Old 2nd September 2013, 20:57   #23
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

SBI happens to be one of the banks with the maximum paperwork and processes tied to getting a car loan. People don't opt for an SBI auto loan because they love this paper trail. They prefer it because of the lowest interest rate, which the SBI manages to offer by giving loans only to lowest risk category.

In case of private banks, they charge higher interest rates on loans but allows loans to people who might get rejected from SBI and other public sector banks. This generates a higher profit margin per loan, which helps them write-off the higher fraction of the defaulters that their business model would generate or to hire the so called 'recovery agents'.

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Originally Posted by aroop View Post
By making a blanket policy like this, IMO SBI is being overly cautious. Let's take the case: someone wants to buy an alto 800 (loan of 3 lakh) and takes a 3 year loan, his EMI turns out to be Rs 9822 at 11%.
Pretty much affordable for someone single with 3-4 lakh package.
I can understand SBI's concern regarding NPAs , but by doing this they are giving up a sizeable chunk of their business.
How about layoffs and other drastic measures that could come in the future due to the economic crisis? In the example that you quoted, what if the person loses his job? With a package of 3-4 lakhs, he might not have enough savings to continue the repayment on his own till the time he finds a new job.

Also, someone who is single can still be treated as part of the family that includes his parents. So he might still get the loan if his parents stand as guarantors and their total income exceeds the required limit. The only difference here is that the parents would also be accountable in case repayment is defaulted, which is not the case if someone takes an auto loan on the basis of their payslip alone.

Its unlikely that anyone who meets the criteria of SBI would go to another bank for an auto loan paying higher interest rates. So it is obviously not going to take a big hit on their business when compared to the numbers they might otherwise get with a higher fraction of NPA auto loans. They are just making the auto loans a low risk area again based on the current market conditions.

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Originally Posted by libranof1987 View Post
The way I see it, the population that will be most hit by this rule is the taxi-cab industry. I bet almost all of them take loans to buy their cabs (unless owned by the cab operator) and proving a yearly income >6 lakhs could be a challenge for them.

Now, could this measure mainly be to cut out the fraud that is common when it comes to taxi-cab loans?
From what I know, individuals who buy taxi or other commercial vehicles for self driven employment would get loans with a lower interest rate than the regular auto loans. The directive may not apply for that category.

Last edited by zenren : 2nd September 2013 at 21:11.
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Old 2nd September 2013, 21:01   #24
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

To think that the M800 ads would proudly say you need less then 5000 as an EMI to have a car. Also, what about Nano buyers? Has SBI finished off for final the Ratan Tata dream?
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Old 2nd September 2013, 21:07   #25
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

This is shameful. The bank and the government are following a discriminatory policy. An individual can have other sources of income to buy a car.
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Old 2nd September 2013, 22:18   #26
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

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An individual can have other sources of income to buy a car.
They just say 'family income' which include all sorts of income that you and your family have. If an individual has an undisclosed source of income that he cannot justify, then I don't think it is fair to blame the government or the bank for not allowing a car loan based on that. I don't see any other type of income that doesn't qualify into total family income.
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Old 2nd September 2013, 22:51   #27
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

Why is SBI so focused of how much the loan applicant makes? Instead SBI should focus on whether or not that person can afford the EMI.

For example, Someone earning 32,000 p.m (4 lakhs annually) may have 2 lakhs saved up for a Maruti Alto. So that would mean he will need only 1.5 lakhs as a loan. For that the EMI for a 3 year loan will probably come to under Rs. 5,000 a month. And for someone earning over 30k p.m that is absolutely manageable.SO why would SBI not want to loan out to that person??

This makes no business sense to me what so ever. Hopefully SBI's Loss will be other Banks gain. SBI will have to probably close down their car loan department in Tier II and Tier III cities I guess where income is not that high.
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Old 2nd September 2013, 23:06   #28
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

IMHO, it was a neccesary evil and it could not have come at a better time. Want to know why? Read on.

One of my Uncle's friend earns Rs. 35-38k per month at Tata Steel. His son & daughter are in their teen years and under their presuure, he bought a car(A Star Vxi) for 4,42,000 with a repayment period of 36 months. Now the condition is this:

1. The car was shunted once, repairs around 35000. Plans to get it done later.
2. EMI was on floating rate basis, and hence EMI has increased. he is struggling to pay it.
3. His wards have been admitted to private engg. college & he has to afford that too.
4. Now everyday, his wife & he are fighting with each other. Each one blames the other for such a hasty decision. Conclusion: Family peace destroyed for a car that is lying around without any use.

In the above scenario, had the salary been 12-15 k more, it would have been easier to cope up with. With this scenario in mind & the current economic downturn, i would say that this move would be a step in the right direction. And moreover, they are implying 'Family income', not individual income.
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Old 3rd September 2013, 00:34   #29
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

Quote:
Originally Posted by zenren View Post
SBI happens to be one of the banks with the maximum paperwork and processes tied to getting a car loan. People don't opt for an SBI auto loan because they love this paper trail. They prefer it because of the lowest interest rate, which the SBI manages to offer by giving loans only to lowest risk category.
Its not true. Have you applied for auto loan in SBI? The reason being these reviews are based on the word "Government" Bank. 90% of them never even approach.

Example:
I checked online for the documents that was required for auto loan (SBI Website).

Next day I walked into a nearby SBI branch with all the docs mentioned in the website and the loan was approved in 3 hours flat (time took for opening a SB account else it was 1 hour job).

The car was delivered at 11AM next day after online transfer was done.

The documentation was the same that was asked by ICICI bank. SO even the paperwork is no different from private bank. Yes, you wont have sales people assisting you by coming home and all.
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Old 3rd September 2013, 10:28   #30
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Default Re: Earn at least 6 Lakh / Year for an SBI Car Loan

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Originally Posted by livyodream View Post
Its not true. Have you applied for auto loan in SBI? The reason being these reviews are based on the word "Government" Bank. 90% of them never even approach.

Example:
I checked online for the documents that was required for auto loan (SBI Website).
Next day I walked into a nearby SBI branch with all the docs mentioned in the website and the loan was approved in 3 hours flat (time took for opening a SB account else it was 1 hour job).
The car was delivered at 11AM next day after online transfer was done.

The documentation was the same that was asked by ICICI bank. SO even the paperwork is no different from private bank. Yes, you wont have sales people assisting you by coming home and all.
I know a lot of central government institutions that run better than private ones. So the word 'government' doesn't undermine anything in my perspective.

All I said was that people go to SBI for a loan because they offer the lowest interest rate. Nothing else matters. Isn't that the reason why you went to SBI for the loan when you didn't even have an account with them?

Documentation might be the same for most banks. You'll see the difference when you don't satisfy one of their requirements based on the documents you provide. Private banks are a lot more 'accommodative' in such cases. Simple reason: they are desperate to achieve their loan targets since most of the lowest risk customers go for SBI/PNB etc. due to lower interest rates.

Last edited by zenren : 3rd September 2013 at 10:33.
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