State Bank of India will continue with the special home loan scheme “as it has helped millions of people to buy homes and also helped it to achieve leadership position in home loans,” the bank's new Chairman, Mr Pratip Chaudhuri, said.
This statement comes in the backdrop of the former Chairman, Mr O.P. Bhatt's comments late last month that the central bank had not understood the home loan product, whereby interest rates are pegged lower in the first few years and re-set to the prevailing rate thereafter.
The RBI has cautioned that ‘teaser loans' raise concern as some borrowers may find it difficult to service the loans once the normal interest rate becomes effective.
“For now we have taken a decision that we will continue with the special home loan scheme. However, we will keep reviewing it. If we feel that we need to revise/ modify then we will take a decision,” said Mr Hemant Contractor, Managing Director.
The regulatory stance is that if home loan pricing is structured in such a manner then that would perhaps attract provisioning requirement, Mr Chaudhuri said.
“On this we will have a dialogue with the RBI and the final course that we will adopt would be a compromise of and recognise both the objective of delivering value to home owners, not to raise their cost of borrowing and to sufficiently address the concerns of the regulators and to satisfy them that we do not want to be in breach of the regulatory prescription,” said the Chairman.