Banks, housing finance firms are trying to avoid teaser loans

By | September 12, 2011

A recent press report said that banks and housing finance firms are avoiding the ICICI and HDFC dual interest rate housing loan schemes due to the higher provisioning norms stipulated by the RBI for such advances.

The RBI has recently fixed an additional 2 percent standard asset provisioning norm for dual rate loans (popularly known as teaser loans). SBI has also discontinued its popular teaser loan scheme.

Mr. Anil Kothuri Edelweiss, executive vice-president, Housing Finance (EHFL) has told the press  that it is unlikely that other financial institutions will come up with dual housing loan rates on account of the provisioning requirement for dual rate loans.

He said that Adnan Abidi/Reuters EHFL, which had launched a dual interest rate housing loan plan is considering a review of the scheme.

Reports said that ICICI Bank and HDFC bank have come out with dual rate schemes with a plan of acquiring a bigger share of the housing loan market. It added saying that the scheme offers rates which will be fixed for the first 2-5 years and subsequently, it will be linked to the banks’ respective base rates.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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