The bug of the campaigns carried out by the major retail chains to promote consumption on credit, with delayed repayment of instalments, has spread to banks.
One month before the peak of the holiday shopping frenzy, banks are starting to throw on the market products with a strong promotional character, using a model that tends to become a tradition. Banks and consumer lending companies are now working in concert to attract clients with loans granted on the spot, whose repayment starts several months later.
The generous lenders, however, forget to mention the interest charged, insisting only on the extended grace period the clients stand to get. The motto "buy now, pay later", is practically conquering all lenders, while the central bank is still trying to battle the aggregate demand that is constantly rising, now also fuelled by the loans in RON at low interests, which are getting ready to replace those in foreign currency NBR has largely managed to freeze.
At any rate, the non-banking financial companies will not be regulated this season either, given that the law that should have organised their operations has yet to be forwarded to Parliament.
A spectacular move comes from BRD-SocGen, the second leading bank on the market, which used the launch of a MasterCard credit card in RON to begin its own yearend campaign. It offers 100 days grace period for the sums drawn during this period and repaid until February 28, 2006. What''s more, the bank does not charge interest for the sums withdrawn through ATMs, besides payments to merchants. In addition, it does not require even the principal to be repaid during this period. After this date, the clients get a standard grace period for such a card, that is 55 days wherein they do not pay any interest for the payments made to merchants. The interest on the line of credit granted through this card is 27% a year, though there is no mention of it in the bank''s announcement.
Raiffeisen Bank, the third leading player, at the end of last week announced a holiday promotion, as well: 0% interest per year for the first three months for the consumer loans taken out in this period, which translates in lower instalments. The interests the customers have to pay after this period of time are 21.9% or 28.9% a year (depending on the client''s option for either fixed or variable interest). The bank has major restrictions on foreign currency lending, due to NBR''s regulations.
Banca Comerciala Romana (BCR), the market leader, is only offering a traditional promotion, that is a 2% bonus for all shopping paid for with a card. The banks are therefore emphasising how practical the card is, as it allows access to a line of credit at any time, and some players are even touting it as "bearer credit". Such a fast access to a loan comes at a high cost, however.
There is still time for other players to launch such offers by the end of the year. After all, the experience of 2004 shows that the bankers are concerned to capitalise on the population''s increased appetite for consumption during holidays.
The banks now have excess liquidity in RON that they cannot invest unless they use the deposit facility of the central bank, which, however, only offers 1% interest per annum. Investing this money in loans is the only option that can yield higher profits. liviu.chiru@zf.ro
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