The State Bank of India is of the view that Reserve Bank of India should be the regulator for all home loans sanctioned by banks and housing finance companies. A single regulator would help remove the regulatory arbitrage that existed between banks and HFCs.
The State Bank of India on Saturday suggested that the Reserve Bank of India should be the regulator for all home loans provided by banks or housing finance companies. "I see no justification for having a separate regulator for home loans. Perhaps the regulations of objective would be better served with RBI itself becoming the sole regulator for all loans including home loans," State Bank of India chairman, Pratip Chaudhuri said on the sidelines of the ICC banking summit here.
Banks currently accounted for more than two-thirds of total home loans disbursed in the country. A single regulator having the same rules for all players would help remove the regulatory arbitrage that existed between banks and HFCs, he said.
Currently RBI regulated home loans provided by all commercial banks, while housing finance companies like HDFC Ltd, LIC Housing Finance Co Ltd, also offered home loans which were regulated by the National Housing Bank. RBI had raised objections to SBI's dual rate policy on housing loan which was tagged as teaser loans introduced some time ago.
"If a bank offers a slightly lower rate in the initial years and higher rate in later years it is called a teaser loan and they are required to make provision but could similar rules not be applied for other players in the home loan market?" Chauduri said.
Meanwhile, SBI has urged upon RBI to reduce the minimum tenure of deposits to three days from seven days for inducing more flexibility of consumers. "These are not issues that will lead to inflation or bring imbalances in financial stability, but induce flexibility to the depositor," Chaudhuri said. "Now we have shadow banking offering investors investment for even one day," he said. The liquidity risk was not very different from a
seven-day deposit and three day deposit, but the question was why make banks handicapped," he asked.