The ongoing home-loan rate war is raising concerns on Mint Road.While State Bank of India chairman O P Bhatt has insisted that lowering home loan rates was a necessary measure to revive the economy, Reserve Bank of India is beginning to voice its concern with the teaser interest rates that banks are currently Offering . Usha Thorat, deputy governor of RBI, said the increase in teaser rate offerings is a cause for concern. “I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal (by the bank) takes into account the repayment capacity of the borrower when the rates become normal,” Thorat said.She was speaking at the Bancon 2009-10 in Mumbai on Tuesday.Bhatt said lower interest rates are being offered to revive the economy, and for banks this is “doable”.“This is evident from the fact that other banks have followed our lead,” Bhatt said. “As far as our home loans are concerned, customers have an option to opt for either fixed or floating rates after the offer period... There are no hidden costs,” he said The State Bank of India was the first to lower home loan interest rates to 8% after which HDFC, ICICI and others also lowered their interest rates. All of them offer home loans in a similar pattern of fixed interest rates for the first 2-3 years and thereafter floating.M D Mallya, chairman and managing director, Bank of Baroda also echoed Bhatt's view. He said the teaser home loans being offered by most banks were only after keeping risk management in mind. “The risk from teaser rates only occurs if banks do not follow necessary risk management practices, which is not the case with Indian banks,” he said.
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