Axis Bank leads in withdrawing teaser home loan scheme

After the Reserve Bank of India has hiked cash reserve ratio (CRR) there are chances banks might start withdrawing teaser home loan offers. Axis Bank India’s third- largest private bank has announced to withdraw its teaser home loan scheme two months before the schedule tenure.

Earlier on January 6 bank had launched a fixed-cum-floating rate home loan scheme. Under this scheme bank has been offering 8.25 per cent interest rate for the first two years. Bank charges 3.5 per cent and 3 per cent interest on loan which is less than the mortgage reference rate for loans up to and above Rs 30 lakh, respectively.

A senior bank executive informed that as the CRR has been hiked due to which it would not be possible for bank to offer a fixed rate for two years. But it will continue to offer 8 per cent fixed rate for the first year.

The bank has also removed the product information from its website. This move of bank has surprised many. A direct selling agent had applied for home loan under the scheme said, “With Axis Bank suddenly withdrawing its teaser rate scheme, I am approaching other banks.”

Last year a number of banks launched special teaser home loan schemes led by countries largest, State Bank of India and Axis was one of the last banks to offer such a scheme.

A senior SBI executive has informed that with the hike in CRR the cost pressure is increasing, but bank will fulfill its commitment and continue to offer the product till the end of March.

However under Housing Development Finance Corporation’s the sanction of loans under teaser rate scheme will close on February 13. The disbursement of loans will be completed by March 31. The Axis bank scheme was advantageous as there was no prepayment penalty. According to industry source, “After two years, if the bank’s rates go up sharply, customers can shift to other banks without any penalty.”

On the other hand, other banks are charging around 2 per cent of the outstanding amount as pre-payment penalty. The hike in CRR by 75 basis points done by RBI is expected to absorb around Rs 36,000 crore from the system. Therefore, this along with advance tax outflows in mid-March is likely to reduce liquidity. In view of this in March most of the banks are likely to review their teaser loan schemes.