SBI has last chuckle, 'teaser' loans get dip
SBI has last chuckle, 'teaser' loans get dip
If there's one person who would be pleased with the Economic Survey, it would be State Bank of India chairman O P Bhatt. The government has after all sided with him in the public sector banker's battle with the regulator over "teaser rates".
To begin with, government has said home loans offered by SBI (and almost all banks earlier), for which interest rates remain fixed in the initial years before turning flexible, should be called "terraced" loans. On these loans, typically, monthly installments would rise over time.
Singling out the success of SBI's fixed-cum-floating rate home loans, the survey said the product launched after the financial crisis of 2008 helped several new home buyers. Till November 2009, SBI had sanctioned over 28,000 such loans with an aggregate value of Rs 3,273 crore and defaults on them have been negligible.
Amid protests from some of SBI's rivals, RBI tried to discourage banks from offering similar loans by mandating that they set aside more capital to deal with potential default. But the government does not seem to be in favour of this approach.
"In general, it is worthwhile giving banks and financial institutions the freedom to introduce new products and thereby expand the options available to consumers and firms," it said.
Amid protests from some of SBI's rivals, RBI tried to discourage banks from offering similar loans by mandating that they set aside more capital to deal with potential default. But the government does not seem to be in favour of this approach.
"In general, it is worthwhile giving banks and financial institutions the freedom to introduce new products and thereby expand the options available to consumers and firms," it said.
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