Why PSBs may not be well-equipped to handle increased retail lending

A loan delayed is a loan denied," says a Mumbai-based dealer for Hero MotoCorpBSE 0.50 %, implying how crucial speedy approval and disbursement of a vehicle loan is. "Most public sector banks [PSBs] take more than a week to clear the loan. A private bank approves a loan in hours and disburses the money on the same day," he says, requesting anonymity. While the dealer has been working with private sector banks for 15 years now, he tied up with PSBs only three years ago. The dealer's experience is symptomatic of the way PSBs function in retail lending. Recently, a slew of PSBs like State Bank of IndiaBSE 0.35 %, Corporation BankBSE 2.66 %,Indian Overseas BankBSE 2.98 %, Vijaya BankBSE 2.60 % and Dena BankBSE 5.06 %cut rates on either consumer durable loans or vehicle loans or on both by up to 200 basis points (or 2%) in response to calls from the finance ministry to make these loans cheaper.

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