Have Union Bank home loan, get sops on other advances

Source:BL:K Ram Kumar:Mumbai,

Buy one shirt, get 50 per cent discount on the second. This is a common sales pitch adopted by outlets selling readymade garments. Now, a public sector bank has taken a leaf out of this popular retail sales strategy to push home loans.

Mumbai-headquartered Union Bank of India has unveiled a new campaign whereby it promises loyalty rewards to its home loan customers.

Under the loyalty reward scheme, the bank's home loan customers will get 50 basis points (one basis point equals 0.01 per cent) concession in interest rate on car loans and waiver in processing charges in the case of education loans.

Besides, the bank will also offer its customers, who have serviced their home loans regularly for three years, top up loans to the extent of the amount that has been repaid.

Portfolio growth

The bank, which recorded a 35 per cent jump in its retail lending portfolio from Rs 10,000 crore as of March-end 2009 to Rs 13,500 crore as of March-end 2010, is using the rewards scheme as a key differentiator to draw more retail customers into its fold.

According to a senior official, the scheme has been drawn up to ensure that along with the home loan portfolio, the car and education loan portfolios also grow.

“Through the recently launched loyalty rewards scheme for home loan customers, we want to carry forward the growth momentum we achieved in FY2010 in the retail lending portfolio,” said Mr S Govindan, General Manager, Union Bank of India.

As of March-end 2010, home loans accounted for 67 per cent (or Rs 9,000 crore) of the bank's total retail lending portfolio of Rs 13,500 crore. Education and car loans accounted for 11 per cent (or Rs 1,500 crore) and 9 per cent (or Rs 1,200 crore) respectively of the total retail lending portfolio.

Union Bank's credit portfolio increased by a robust 23.3 per cent (to Rs 121,000 crore) as against the Reserve Bank of India's non-food credit growth projection of 16 per cent for the banking sector for FY2010.

In order to attract savings bank (SB) deposits, the state-owned bank also plans to unveil a pre-sanctioned loan facility for its SB account holders. The loan amount in this case will be linked to the average balances maintained by them in the account.

The bank's current account, savings bank account (CASA) deposits nudged up to 31.68 per cent (30.06 per cent in FY2009) of the total deposits of Rs 170,000 crore as of March-end 2010. In FY2010, its deposits increased by 22 per cent.

According to Mr Govindan, the bank's latest ‘10/10' campaign on home loans, among others, focuses on features such as hassle-free documentation, extended repayment period (25 years), flexible equated monthly instalment facility and no prepayment penalty.