PNB not to extend home loan scheme

PNB not to extend home loan scheme

Mumbai: Punjab National Bank has decided not to extend its special home loan scheme beyond its 31 December deadline, chairman and managing director, K.R. Kamath, said. This makes the Delhi-based lender the fourth mortgage giver to withdraw the scheme in the last one week.

Housing Development and Finance Corp. (HDFC), ICICI Bank and Mangalore based Corporation Bank has earlier in the week decided that their special loan schemes will not continue beyond their initial last date of 30 November.

The withdrawals come after the Reserve Bank of India in its monetary policy review in November described these loans as “teaser loans" while expressing unhappiness with these schemes saying banks had not taken into account the buyer’s ability to repay these loans when the interest rate changes from fixed to floating in three years.

Under these special schemes, banks were offering a discounted fixed rate in the first two or three years to attract consumers. From the third or fourth year, the rates would increase in line with the interest rate increases by the banks.

Meanwhile, Kamath also said that Punjab National Bank’s proposed acquisition of Kazakhstan’s JSC Dana Bank is back on track and likely to be completed by the end of fiscal 2010-11. “We will be paying just under $25 million for the deal," Kamath said.

In an interview to Bloomberg in September, Kamath had said problems had risen during the due diligence process. PNB is buying a 63.6% stake in the Kazakh lender.