With RBI standing against the continuance of teaser loans, many banks have decided to opt out of the scheme. Public sector lender, Corporation Bank has stopped the scheme from December 1.
However, followers of SBI have questioned the apex bank seeking it to define teaser loans.
SBI Chairman OP Bhatt said that these loans are handed out only to eligible customers after due diligence has been performed on their repayment capacity. He also added that the concept of teaser loans being followed by the developed nations cannot be applied to an emerging economy like India.
The home loan scheme of SBI charges eight per cent interest for the first year, nine per cent for the second and third year. From the fourth year, the loan rate gets linked to the bank's base rate.
SBI also said that higher provisioning in this regard would mean that a bank will have to keep aside more funds from its profit amount, thereby leading to an adverse effect on the bottom line (net profits).
RBI had called for a meeting of major banks to discuss views in this regard. The meeting was also attended ICICI Bank Managing Director and CEO Chanda Kochhar and HDFC Bank Managing Director Aditya Puri.