NEWS & ADVICE : HOME LOANS
Banks may adhere to RBI's stand on teaser loans
By Joseph Samson
Nov 9, 2010
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Reserve Bank of India's call on teaser home loans seems to have made an impact on banks. Although the largest lender of the country, State Bank of India which also happens to be the initiater of the teaser schemes stands firm on its view against RBI's, but other banks seem to have decided to slower their pace in this regard.

RBI had asked banks to increase the provisioning for teaser loans. The apex bank has raised the provisioning to 2% from the earlier 0.4%.

Punjab National Bank has decided that it will not push its teaser home loan scheme till December end, said an official of the bank. He added that as per RBI's norms, the bank will have to keep Rs 12 crore as provisioning for these loans.

"Teaser rate loans are a concern. Lenders use the initial lower interest rate while considering the eligibility of a borrower," said Keki Mistry, vice-chairman & chief executive officer at HDFC.

"We will wait for the initial response from (housing finance regulator) NHB. We have no plan to continue with our festive home loan offer, which gives loans at 9.25 per cent for the first five years," said R R Nair, managing director & chief executive at LIC Housing Finance. The scheme is open until November 15.

"So far, housing finance companies are not required to make any provision on standard teaser loans. We will come up with guidelines to ensure there is no arbitrage in the system," said R V Verma, chairman, NHB.

Dena Bank is however not happy with the response of its teaser scheme, said Executive Director A K Dutt.


 


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