RBI deputy governor express concern over teaser home loan rates

Almost all the banks are offering ‘teaser' home loan rates or the fixed-cum-floating rates which are a major cause for concern.

Ms Usha Thorat, Deputy Governor, Reserve Bank of India said, banks must inform the borrowers about the implications of such rates and during evaluation the repaying capacity of the borrowers is taken into account when the rates become ‘normal’.

Ms Thorat stated it is the responsibility of the each bank to take up the issue at its own level.

Ms Thorat's views are of utmost importance in view of the fact as most of the banks, both public and private, had announced dual rate home loan schemes.

In these schemes the banks have fixed interest rate at a low rate of 8-8.5 per cent for the first few years after which it becomes the prevailing floating rate.

State Bank of India was the first one to launch such a scheme, later on almost all the other banks followed it. Mr O. P. Bhatt, Chairman, State Bank of India stated the bank had launched the special loan scheme due to excess liquidity and no pressure was put on it by the government.

He added at the time of normal floating rate loans also, the interest rate increases after a few years.

He said the 8 per cent loan scheme helped in the growth of SBI's present credit offtake. Mr M.V. Nair, Chairman of the Indian Banks' Association and Chairman and Managing Director, Union Bank of India said, during the sanction of loan bank does an appraisal of the borrowers' repaying capacity and transparency is maintained in the rates, thus there is no issue with regard to dual rate home loan schemes.