Are fixed-floating rates a sound option for retail home loan borrowers?

Two leading industry experts debate the merits and demerits of the new fixed-floating rate product that the SBI chairman proposed recently

State Bank of India (SBI) chairman Rajnish Kumar recently spoke about seeking a clarification from the Reserve Bank of India (RBI) on launching long-term home loan products that would initially have a fixed rate and would then move to a floating rate.

His proposal has revived memories of a home-loan product SBI had pioneered in 2009, which was popularly known as “teaser loan”. This product offered customers a home loan at a lower rate of interest initially. Once that period got over, the customer was moved to the market-linked floating rate existing then. The idea was that it would enable