The festive season may be over, but festive offers on loans are open for the next couple of months.

Public sector banks offering housing and auto loans at discounted rates under their festival campaigns that began in September, have decided to extend the discounts beyond December 31, as the demand for loans remains muted.

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While recent data from the Reserve Bank of India (RBI) shows credit demand has been poor despite these offers, bankers hope the demand would pick up in the last quarter of the financial year.

Credit growth during the April-December period was 8.2 per cent, against RBI's projection of 18 per cent credit growth in 2011-12.

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"We have decided to extend the festive offers till February 28 to encourage retail customers to go for housing and car loans," said M Narendra, chairman and managing director, Indian Overseas Bank.

The bank is offering 0.50 per cent concession on lending rates and 50 per cent concession on processing charges.

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IDBI Bank had waived processing charges and fees almost a year ago to strengthen its grip on retail assets.

The bank has been offering a 100-basis point discount on vehicle loans and a 50-basis point one on home loans since October 1. It may continue this offer for one or two more months.

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"The demand was not as high as expected. Since the interest rates are not likely to rise further, we have decided to continue with the current rates," said R K Bansal, executive director, IDBI Bank.

In November, the outstanding amount in home loans rose 7.6 per cent, compared with 8.8 per cent a year ago, while vehicle loans grew 9.5 per cent, compared with 15.5 per cent in the year-ago period, according to RBI data.

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Bankers said there was hope of credit pick-up in the fourth quarter. "We have decided to extend the concession by one month, since there was more demand towards the end of the offer period," said N Seshadri, executive director, Bank of India. The bank offers 50 per cent concession on processing charges.

M D Mallya, chairman and managing director, Bank of Baroda, said the lender would run its festive offer on housing and car loans for one more month.

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"The response was fairly good, given the current context," Mallya said, adding the extension would help the bank rope in more borrowers with the help of attractive rates.

Overall credit growth stood at 17 per cent as on December 16, compared with 24 per cent a year ago. High lending rates and high inflation have impacted growth in the retail segment this year.

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RBI had raised policy rates by 375 basis points in a span of 19 months since March 2010. Banks responded by raising lending rates by around 250 basis points in the same period.

Banks have been able to add Rs 3.24 lakh crore to the outstanding loan base so far this financial year.

However, it would be an uphill task to continue the trend, as banks need to disburse around Rs 3.8 lakh crore till the year-end to meet RBI's projection of 18 per cent.