Once bitten, SBI says enough with teaser loans

MUMBAI: Country's largest lender SBI on Wednesday ruled out re-launching teaser rate loans, days after its private sector rivals HDFC and ICICI introduced special hoam loan schemes with interest rates fixed for initial few years.

"We have no plans as of now to launch any special home loans," State Bank of India (SBI) Chairman Pratip Chaudhuri told reporters here.

Reminiscing of the bank's earlier brush with the Reserve Bank in this regard, he said, "We have been through the teaser loan definition. We respect the regulator's stance."

The country's largest private lender ICICI Bank had recently launched a dual rate home loan product which offers fixed interest rate to start with after which the loan turns floating. The announcement was followed by the launch of a similar product by mortgage major HDFC too this Monday.

Industry observers had pointed out that both these products have some characteristics of teaser rate loans, pioneered by SBI in 2009.

Talking of the bank's earlier experience, Chaudhuri said, "We had tried to argue (with the RBI), to reason, but the regulator has a position and already we have provided 2 per cent on our teaser loan portfolio that is Rs 500 crore. I think it was a stiff enough penalty and we would not like to live through it again."

Fearing an asset bubble build-up and to contain the impact, the Reserve Bank had increased the provisioning for teaser rate loans by a steep five-fold to 2 per cent recently.

SBI, under the chairmanship of Chaudhuri's predecessor O P Bhatt, was the first lender to offer teaser products in the days of ample liquidity in November 2009. Courtesy the product, it gained a dominant position in the housing loan segment by overtaking HDFC.

Soon, other lenders also followed suit but all the banks, including SBI, discontinued the product after the RBI tightened the norms.

Source: Economic Times