Teaser loans not to be extended by most banks
By Joseph Samson
Apr 1, 2010
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Most of the big lenders have decided not to go ahead with the special home loan scheme which ended its tenor on 31st March 2010. Banks like Punjab National Bank, Corporation Bank, United Bank of India and Bank of Maharashtra have decided to end up this scheme.

State Bank of India, the country's largest lender has extended the tenor of this scheme till 30th April. SBI will be offering 8% interest for the first year, 9% for the second and third year and the remaining years would carry interest on a floating basis.

The loan rate has been hiked for loans amounting less than Rs. 50 lakh for a 20 year period. Previously, the bank used to offer 8.5% fixed rate for the second and third year for a loan amount less than Rs. 50 lakh and 9% was charged for loans greater than Rs. 50 lakh.

"Our management decided to withdraw the scheme since they feel that RBI is not very happy about it," said officials from a PSU Bank. Punjab National Bank, Corporation Bank, United Bank of India and Bank of Maharashtra would now be offering home loans based on their prime lending rates. They have not disclosed the new rates.

"We have adequate liquidity coupled with a huge demand for such loans from home buyers. Also, we feel that we can sustain the scheme at these rates," said a senior SBI official explaining the bank's decision to extend the loan tenor.

"SBI is booking Rs 2,500 crore of loans every month under the special scheme and the year on year home loan portfolio has risen by 30%." "We will decide on whether or not to continue the special home loan scheme after RBI announces its annual policy on April 20," SBI officials said.

Banks like HDFC, ICICI Bank, Axis Bank, Union Bank of India and Canara Bank had removed this scheme quite early. These banks also offered step up loans. Most banks offered 8% or 8.25% for the first year and raised the fixed rate to 8.25% or 8.5% for the second year.


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