Mumbai: Indian banks need to ensure that customers who borrow at special loan rates will be able to service the debt when interest rates rise, Reserve Bank of India (RBI) deputy governor Usha Thorat said on Tuesday.
Signalling caution: RBI deputy governor Usha Thorat. Ashesh Shah / Mint
“Teaser rates do cause a concern. Banks should ensure that income of borrowers is adequate to service the loan when recovery picks up and interest rates return to normal levels,” she said in a speech at a banking conference.
Most Indian banks have been offering special home loan rates of 8-8.5% for three years to entice borrowers, and they are also offering low rates on auto loans.
Strengthening economic growth and rising inflation has seen analysts and the markets factor in a tightening of monetary policy by RBI, perhaps as soon as a policy review on 29 January.
RBI slashed its key lending rate by 425 basis points between October 2008 and April 2009 as part of its efforts to help revive a slowing economy.