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Most banks not to offer teaser loans

Most banks not to offer teaser loans
PTI
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First Published: Mon, Sep 26 2011. 02 45 PM IST
Updated: Mon, Sep 26 2011. 02 45 PM IST
New Delhi: Unlike ICICI and HDFC, other banks and housing finance firms may not come out with schemes offering dual interest rate housing loans on the back of higher provisioning norms stipulated by the Reserve Bank of India (RBI) for such advances.
“Given the provisioning requirement for dual rate loans, it is unlikely that other financial institutions will come up with dual housing loan rates,” Edelweiss Housing Finance (EHFL) executive vice president Anil Kothuri told the news agency. EHFL, which launched a dual interest rate housing loan plan about two weeks ago, is considering a review of the scheme, he added.
Early this month, ICICI Bank and HDFC came out with dual rate schemes with an eye on garnering a bigger slice of the housing loan market. As per their schemes, the interest rate is fixed for the first 2-5 years and subsequently, it is linked to the banks’ respective base rates.
The RBI has fixed an additional 2% standard asset provisioning norm for dual rate loans (popularly known as teaser loans).
Subsequently, the largest lender, State Bank of India (SBI), discontinued its popular teaser loan scheme.
Canara Bank executive director Archana S. Bhargava said her bank also has no plans to float dual interest rate loan schemes. “Canara Bank has no such plans as the provisioning requirements for such loans is pretty high. We will rather give concessions or exempt customers from certain kind of charges to attract more customers,” she said.
Industry experts, too, opined that the higher provisioning norms - which entail more funds being set aside to deal with defaults - are putting pressure on the margins of lenders.
“As margins on the dual rate home loans shrinks due to present provisioning norms, it will depend on individual banks or housing finance companies to take a call on this matter,” Shweta Jain, a director with real estate research firm Cushman & Wakefield said.
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First Published: Mon, Sep 26 2011. 02 45 PM IST
More Topics: ICICI | HDFC | Housing Loans | Finance | EHFL |