Reserve Bank of India has decided to increase the provisioning on teaser loans. The provisioning has been raised from 0.40% to 2%. This has made banks to resent as teaser loans have been a major source of revenue generation for banks.
The largest lender of the country, State Bank of India has said that the special home loan scheme of the bank is not a teaser loan. "It (RBI) has not defined what it means by a teaser loan," said SBI chairman OP Bhatt.
SBI was the first bank to initiate these loans in the banking arena and has also been the leader in continuing these loans.
With RBI, asking for more provisioning on these loans, the banks will now have to set aside more capital for home loans above Rs 75 lakh. Also the apex bank has said that banks cannot lend more than 80% of the total valuation of the house for which the loan is being taken by the borrower.
"Clarity is needed on whether the provisioning has to be made across the life of the loan, and for how long... They (RBI) have only said that wherever there is the so-called teaser loan, there has to be provisioning," said KR Kamath, chairman of Punjab National Bank.
O P Bhatt has seriously opposed RBI's decision saying that the bank only grants loans after due diligence check on the repayment capacity of the borrower. SBI, Punjab National Bank , Corporation Bank and ICICI Bank offer loans where interest rate is comparatively low during the initial years.
"However, banks may not immediately raise interest rates on home loans since demand is high during the festival season," said TY Prabhu, CMD of Oriental Bank of Commerce.