The country's biggest bank will now offer car loan only to those who earn at least Rs 2.5 lakh a year - or about Rs 21,000 a month, up from Rs 1 lakh - or Rs 8,300 a month - earlier. The bank had been aggressively pushing a seven-year car loan product with a monthly installment (EMI) of Rs 1,765 per lakh.

The bank is wary of the scheme attracting borrowers who may not be able to afford a car. SBI Car loans interest rates recently increased by 75 basis points to 12%.

A senior official in the bank's auto loan business said the "pro-active step" to raise income requirements followed rising signs of stress. "We have noticed some delinquencies that have happened in the last six months. So we are taking this proactive step," the official told ET.

The official said data obtained from various centres had shown that that there was a stress on repayments in this segment because of rising cost of living, especially among those customers who had other loans. "The first reaction is to default on auto loans as the interest rates are much lower than personal loans," he said, requesting anonymity.

SBI's total bad loans have risen to Rs 33,946 crore at the end of September 2011 from Rs 23, 205 crore a year ago. The total non-performing assets in the personal retail segment stood at Rs 4,870 crore. jannat 2 songs free download

Details of non-performing assets in auto sector are not available, but another bank official said it was about 1.5% of the total non-performing assets of the bank.

Financial planners justify the bank's move and agree that a lot of people might be affected by the rising living costs. "A lot of people underestimate their financial outgoes. Yes, they do not want to default but then the bank (SBI) must have seen some loans going bad," said Naresh Pachisia, managing director of SKIP Securities.

SBI feels the new annual income limit of Rs 2.5 lakh will be safe enough for both the bank as well as those buying a small car. "Customers who are looking to migrate from two-wheelers to small cars should be earning enough to spare for a monthly payment of say, around Rs 1,765 per month," the official said, adding that the bank will do the due diligence to check whether they have any additional loan burden. The maximum loan one is eligible for is 48 times his net monthly salary.