ICICI Bank is keen to enter the reverse mortgage business once the guidelines are laid out, a top bank official said.
“We think the reverse mortgage business is a great idea and would enter it once the guidelines governing this business are clearly laid out,” Kalpana Morparia, joint managing director, ICICI Bank, told PTI here.
Targeted at senior citizens, the concept of reverse mortgage was mooted in the Budget by Union finance minister P. Chidambaram, who said that the National Housing Bank (NHB) would soon introduce this product into the market.
NHB is expected to offer refinance to players engaging in this business.
Reverse mortgage enables a senior citizen who is the owner of a house to avail of a monthly stream of income against the mortgage of the house while remaining the owner of the house as well as occupying it throughout his lifetime without repayment or servicing of the loan.
Describing it “as a great idea”, Morparia said that this concept was very popular overseas and held immense potential in India which had a large population of senior citizens.
In India, there are a number of old people whose progeny resided abroad and did not have need for their parents’ Indian homes. There are also a number of old people living on pensions.
“Reverse mortgage acts as a combination of a housing finance and insurance product and enables these senior citizens to monetise their holdings,” she said.
Reverse mortgage offers several advantages to senior citizens. While the loan, either a lump-sum or in monthly instalments, is not required to be paid during the lifetime of the senior citizen or the spouse, the house can be continued to be occupied by them during their lifetime.
Reverse mortgage also allows for revaluation of the house after specific periods, say five years, and if its value has increased in that time, the senior citizen can get a higher amount.
If the senior citizen or the spouse live beyond 15 years, the normal period of the mortgage, they can continue to live in the house till the last of them expire. However, they will have to pay interest on the loan amount unless they had opted for the instalment system.
If death occurs before the normal time of 15 years, the amount to be recovered will be limited to only that which had been given to the senior citizen by way of loan or instalments.
If there is any surplus after sale of the property mortgaged and after adjustment of loan and interest amounts, the refund will be made to the heirs of the senior citizen.
“Reverse mortgage will thus prove beneficial for those above 55 years of age. However, we have to await clear guidelines before taking the plunge into this business,” Morparia said.
On inflation, she said it appears to have peaked at current (6%) levels and may start softening post-April which could act as a “coolant” against rate hikes.
”With inflation just a little over 6% and expected to decline... post-April, there is a view that interest rates have peaked,” she said.
She also claimed that there were no hidden costs in any of ICICI Bank’s offerings and all terms and conditions were laid out in the most transparent manner.
claimed that there were no hidden costs in any of its offerings to customers and all terms and conditions were laid out in the most transparent manner.
”ICICI Bank is very transparent in all its dealings and there are no hidden costs in any of our schemes,” Kalpana Morparia, the bank’s Joint Managing Director told PTI here.
All aspects relating to maturity of a product, rate of interest to be charged or given and penalties in case of defaults are laid out clearly and explained to customers, she said.
In all ICICI Bank products, wherever conditions are mentioned, there was a section called Most Important Terms and Conditions, which clearly stated all relevant details of importance to the customer, she said.
Highlighting the bank’s customer-friendliness, Morparia said that at ICICI Bank ”we have gone out of our way to focus on this.”
She said that ICICI Bank was implementing these policies even before the Reserve Bank of India (RBI) had come out with guidelines on fair practices and reasonableness in bank services and charges.