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Personal loans just got cheaper

BS Banking Bureau | August 26, 2004 14:02 IST

How low can you go? Personal credit just became cheaper, at less than 12 per cent per annum! ICICI Bank launched its unique credit card -- ICICI Bank Easy Deposit Card -- offering a rate as low as 0.99 per cent.

Wait! Before you decide to pick up that phone and call up the bank, there is a catch. The offer is only eligible for bank customers having a fixed deposit with the bank.

What's more, the extent of the credit is limited to the amount lying in the fixed deposit. The entire model thus runs contrary to what is perceived as unsecured credit in credit card parlance.

ICICI Bank has found a unique means to hedge against the high default rate of eight per cent in this retail lending business.

So what is in it for the customer since he is essentially taking a credit against his own funds, very much like an overdraft on his own balances?

Says V Vaidyanathan, senior general manager and head-retail products, ICICI Bank: "It opens up a new category of customers, who otherwise may not be eligible for a credit card."

As the product does not call for any proof of income, this makes it easier for certain category of customers to get a credit card. Imagine having to lug around thousands of rupees when you can use a small rectangular piece of plastic and take a credit against your funds.

So how does it differ from a debit card then? With the introduction of ICICI Bank's new product, the bank customer can earn an interest of at least 5.25 per cent on the fixed deposit, pay less than 12 per cent interest on his revolving credit, and in the bargain earn points for every rupee spent.

Something he cannot avail from a debit card. What's more the product is free so long as one maintains a fixed deposit with the bank.

"A lot of customers have fixed deposits with us, and we will not charge any fee for the product," says Vaidyanathan.

"A customer can save as much as Rs 5,000 a year by maintaining a fixed deposit as he need not break his deposit and also earns on the same," points out Vaidyanathan.

Moreover, the Easy Deposit Card offers a gamut of benefits and privileges to the customer including cash access fee waived off at ICICI Bank ATMs, rewards programme which helps the customer earn up to five reward points on every Rs 100 spent, and free insurance benefits, as well as an add-on card and comprehensive travel benefits.

It also allows for other benefits like dial-a-draft, Teleoptima global calling card and 24-hour phone-banking.

The card is available with fixed deposits of tenure one year and above and has two variants -- gold and silver -- available at a minimum fixed deposit balance of Rs 40,000 and Rs 20,000 respectively.

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