SBI not to resume teaser home loan scheme

Having paid a stiff price in the form of huge provisioning, the country’s biggest lender State Bank of India today ruled out relaunching a dual rate scheme for home loans, according to its chairman P Chaudhuri.

Its competitors — ICICI Bank and HDFC — have already come with a similar scheme to grow businesses. RBI defines teaser loan schemes as those offered at a low interest rate in the first few years, after which they are reset at higher rates.

“The bank has gone through teaser loan scheme by the Reserve Bank of India (RBI) and it respects the regulator’s view,” Chaudhuri told reporters on the sidelines of the R N Talwar memorial lecture here.

He said the bank had tried to reason with the regulator but it has a point. SBI has already provided (at two per cent) about Rs 500 crore for the teaser loan portfolio.

“It is a stiff penalty (high provisioning) and the bank will not like to go through it again,” he added.

SBI had launched its teaser loan scheme in early 2009, when it was sitting over a cash pile of nearly Rs 1 lakh crore, following a slowdown in the credit market amid the ripple effects of the global financial crisis. Other banks followed suit as SBI dislodged HDFC as the largest home loan lender.

Such fixed-cum-floating housing loan schemes disappeared from the market this April after RBI expressed concerns that these might affect the asset quality of banks. The last one to call off such loans was SBI in late April soon after the current chairman took over.