Lenders promise support to teaser interest rates

The Reserve Bank of India may not be comfortable with it

, but the country's largest home loan providers believe that teaser rates are here to stay.

"Going by the industry trend, it is for sure that teaser rates are going to stay here permanently," HDFC chairman Deepak Parekh said on the sidelines of the 37th national convention of the All India Management Association.

A few days ago, S.K. Bhattacharyya, managing director of the State Bank of India, had said, "We got an overwhelming response from borrowers and the 8 per cent home loan scheme was profitable. I don't see why we shouldn't continue with it."

Teaser home loans carry discounted interest rates for a specified number of years during the initial period after which they are aligned to the prevailing rates. The current teaser loan offers of both HDFC and the SBI will expire on September 30, but both are likely to extend the scheme.

The SBI cannot lend below its base rate, which stands at 7.5 per cent. However, HDFC, being a non-banking financial institution, does not have to follow the base rate system.

HDFC has recently increased its benchmark prime lending rate following which the equated monthly instalments of its existing borrowers will go up.

Parekh said deposit rates of banks might go up 25-50 basis points next month, followed by a hike in lending rates.

"The liquidity in the banking system will be under some pressure, but I believe the government borrowing will be lower than Rs 1,70,000 crore in the second half of the current fiscal given that it has mopped up a good amount of money through 3G auction and advance tax payments," he said.

He stressed the need for financial inclusion. "Delaying financial inclusion will do irreparable damages. Financial inclusion also has a bearing on land acquisition. Financially excluded people tend to develop a distrust for the government," he said.

Lenders promise support to teaser interest rates

By: Bhavana Jhingan

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