Higher provisioning for new home loan schemes not needed: ICICI Bank

ICICI Bank on Tuesday said its recently launched fixed-rate home loan scheme would not attract the higher provisioning mandated for teaser-rate housing loan products.

"Additional provisioning is not required on this product because the fixed rate offered is similar to the current floating rate on home loans," a bank spokesperson told Business Standard.

The bank said from August 19, it had introduced two home loan products, with interest rates fixed for one and two years. The schemes were a reminder of the teaser loan offers that had disappeared from the market after the Reserve Bank of India (RBI) expressed concern these products affecting the asset quality of banks.

To discourage banks from offering teaser rate schemes, RBI had increased the standard asset provisioning for all such loans from 0.4 per cent to two per cent.

ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar said the bank aimed to allow home loan borrowers plan their equated monthly installments (EMIs) better. "It is just a product which allows customers to lock-in for one year or two years and plan their EMIs in a better manner," she said, adding, "This is both fixed and floating. In very clear terms, the rate of interest gets fixed on Tuesday.

It is not lower than the rate applicable on the floating rate offered now."

She said by choosing this scheme, borrowers would be able to “fix the spreads on floating rates” and would have a clear idea on their EMI payments.

Kochhar also said RBI's stance on policy rates would depend on the inflation in the next few months.