The largest lender of the country, State Bank of India has declared that its special home loan scheme cannot be considered as teaser loans as per the definition of the same declared by Reserve Bank of India.
"Our special home loan schemes are not teaser loans. If you go about the definition of teaser loans, as provided by RBI in the recent circular, our loan does not fall in this category. Hence, we have not made any extra provisioning on this account," OP Bhatt, Chairman, SBI said.
The apex bank had been concerned over these loans since quite some time. "It has been observed that many banks at the time of the initial loan appraisal do not take into account the repaying capacity of the borrower at normal lending rates," RBI said in its November policy.
Going over this concern, RBI had raised the provisioning on these loans from 0.4% to 2% of the total outstanding loan amount.
In response to this, SBI brought some changes in its special home loan offerings but continued to offer concessions on loans sanctioned till March 31.
Bhatt said that according to RBI, teaser loans have been defined as per three aspects: the differential interest rate, transparency and risk to the borrowers. He said that out of these, SBI has maintained strict adherence to two of these.
"There is total transparency regarding the interest rate and other terms and conditions from day one. Secondly, our eligibility norms are based on the highest interest rate chargeable at the time of application rather than the discounted rate, so the effect of the increase in the EMIs on the customer is also taken care of. So in both the aspects it does not fall into the category of teaser loans," Bhatt explained.
"For the time being, RBI has exempted us from this higher provisioning and hence we have not made any extra provisioning for home loans in the third quarter," Bhatt added.