Banks offer cheaper home and car loans to women borrowers

Last week, Federal Bank had launched a special car loan for women.

The product, ‘She Car’, requires women borrowers to pay interest up to 80 basis points lower than the card rate.

A Federal Bank official said the rise in the number of women drivers had prompted the bank to launch the product.

For a three-year loan, women borrowers will be charged 10.5 per cent, while other borrowers will be charged 11.3 per cent.

On a loan of Rs 4,00,000, women borrowers will pay equated monthly instalments (EMIs) of Rs 13,000. For other borrowers the EMI works out to Rs 13,152. 

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Through three years, the difference is Rs 5,472. Let’s now look at home loans offered by State Bank of India (SBI).

A few months ago, the bank had announced it would offer home loans to women borrowers at rates lower than the card rate.

For regular borrowers, the bank offers loans of up to Rs 75,00,000 at 10.15 per cent, while for women borrowers, the rate is 10.1 per cent.

A back-of the-envelope calculation shows on a loan of Rs 75,00,000, for 25 years, women borrowers can save as much as Rs 79,500.

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These loans for women are provided only if the woman is the sole applicant or the first applicant in case of a joint home loan.

Also, the asset (car or house) must be in the name of the women. In case of a house, the woman concerned has to be the first holder of the property.

Do women benefit from such loans?

“There are no downsides to these products.

This is just segmenting of the market; women customers are another segment for banks. They are just packaging the same product to appeal to that particular segment,” says Rahul Soota, executive director of Mymoneymantra.com.

Another reason why banks offer special credit products to women is delinquencies in this segment are lower and women borrowers carry lower risks, Soota says.

A Surendran, general manager and head (retail business), Federal Bank, agrees. “We are inclined towards giving additional benefits to women because we believe the rate of repayment is better.”

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Though women-specific loans offer benefits, the case isn’t the same with women-specific deposits.

Banks offer savings bank accounts for women with additional features but often, the minimum balance required is higher.

For instance, the quarterly minimum balance required in case of Federal Bank’s regular savings bank account is Rs 1,000.

But for its Mahila Mitra savings bank deposit for women, the requirement is Rs 5,000.

Mahila Mitra has a Rs 5,00,000 personal accident cover, which is free for the first year. 

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It offers double the number of cheque leaves compared to regular accounts.  

 “We have seen the average balance is 10-12 times higher in case of women depositors, compared to ordinary savings bank accounts,” says Surendran. 

Bank of India offers the Star Mahila Account, which provides women depositors a personal accident cover and discounted health check-up facilities.

However, the quarterly minimum balance required is Rs 5,000, compared with Rs 500 for regular savings bank accounts.

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In case a woman depositor already has a personal accident cover or does most transactions online and, therefore, doesn’t need additional cheque leaves, it may not make sense to lock up higher amounts in savings bank accounts.

“The customer has to figure if it is really beneficial,” Soota says.