SBI says no plan to launch teaser loans

The nation's largest lender State Bank today said it has no plan to relaunch the dual/fixed rate home loan products, popularly known as teaser loans, as was done by rival ICICI Bank last week.

"Right now there is no plan for that," chairman Pratip Chaudhuri told reporters on the sidelines of a Ficci-IBA conference here.
Referring to the bank's earlier experience with the regulator when it had argued that its dual rate loan was not a risky teaser loan as was being made out by the RBI, Chaudhuri said, "the loan that we had earlier, in spite of lots of our persuasion with the Reserve Bank, they called it as a teaser loan."
"Today our home loan products are widely accepted and there is no shortage of demand for them. Our home loan portfolio is growing in the same way as was earlier. Borrowers are aware that these are the times of floating rates and that the rates will go up some time and then will go down," he said.
"Even our competitors have launched the fixed rate product only for two to three years after which the loan becomes floating. As of now, we have no plans to launch a dual rate loan," he added.
On August 19, the second largest lender ICICI Bank had launched two new home loan products with interest rates fixed for one and two years and floating from the third year onwards.
Under the new loan scheme of ICICI, a customer could avail of a housing loan at a fixed rate of interest for one or two years, after which the interest rate would become floating. In the one-year fixed rate home loan scheme, the bank is offering loans up to Rs 25 lakh at 10.50 percent, Rs 25-75 lakh at 11 percent and those above Rs 75 lakh at 11.50%.
Under the two-year fixed rate scheme, loans up to Rs 25 lakh is priced at 10.75%, Rs 25-75 lakh at 11.25% and those over Rs 75 lakh at 11.75%.
The floating rate from the third year will be linked to its base rate plus margin decided at the time of sanction of the loan, the Chanda Kochar-led bank had said.
Such fixed-cum-floating housing loan schemes popularly called teaser loans, disappeared from the market this April after the Reserve Bank expressed concerns that these products may affect banks' asset quality. The last one to call off such loans was SBI in late April soon after its current chairman took over.
The past SBI chairman Om Prakash Bhatt vehemently argued with the RBI that his special loan scheme was not teaser loan and refused to give into the RBI demand to call it off. But within a month of his retirement in March end, the new management headed by Pratip Chaudhuri decided to discontinue the special scheme.
SBI launched the teaser loan scheme in late 2009, when it was sitting over a cash pile of nearly Rs 1 trillion, following the slowdown in the credit market in the wake of the ripple effect of the global recession that began in September 2007 in the US.
Soon other banks too followed suit as SBI dislodged mortgage player HDFC as the largest home loan lender.
The central bank defines teaser loan schemes as those offered at a comparatively lower rate of interest in the first few years, after which rates are reset at higher rates.
When specifically asked is it because of the regulatory concerns, Chaudhuri said "it is much simpler for the sales force to explain. We would like to keep the whole offering simpler."
The chairman said the bank is sitting over a cash surplus of Rs 30,000 crore now and added that even at a 20% credit growth, it can stick its neck out this year, if North Bloc refuses it permission to launch the rights issue.