Strict action to come up against teaser rates: RBI
By Joseph Samson
Apr 19, 2010
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The Reserve Bank of India has a view that the teaser loan phenomena might not have actually come to an end. With a housing finance company (HFC) coming up again with the teaser scheme the RBI fears that the other players might also follow suit and the era might restart once again.

The RBI had come up with the directive for base rate following the discrimination which it felt was done to customers in the teaser regime.

RBI sources say that the apex bank may take up the issue to the National Housing Bank (NHB) and forbid HFCs from involving in such schemes.

Further, there may be tightening in the form of lending in such schemes which offer a fixed interest rate in the initial years and switch to a floating one later. Also this phenomena of granting loans at low interest only to new customers would be mandated to be stopped, sources say.

While all lenders have stopped this scheme other than SBI, HDFC has also relaunched this scheme.

"It is a marketing gimmick. If it is going to start another round of teaser rate and disturb the apple cart, we will definitely talk to the NHB and also HDFC," a senior RBI official said.

RBI says that the customers in this scheme dont even know how much they have to pay. HOwever, SBI executives said that all details are explained to the borrowers and lending standards are not lowered.

Banks are demanding a level to be maintained with NBFCs as they are not a part of the base rate mechanism.

"If a housing finance company, which is categorised as an NBFC, charges 8.25 per cent and a bank's base rate is 9 per cent, then banks will be out of competition," a banker said.


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