The public sector banks may be prevented from introducing any new teaser home loan schemes by the Finance Ministry. The intention of doing this is to prevent any occurrence of rate war between the banks, thus causing increasing NPA levels.
Private sector banks HDFC Bank and ICICI Bank reintroduced teaser home loan schemes this month after SBI which was the only bank offering these loans even after the end of their duration in March.
The ministry is more interested in preventing the public sector banks from introducing teaser loans after July 1 once the base rate comes into effect.
A finance ministry official said, “There could be unviable lending without keeping in mind the borrower’s repayment capacity. Some of the schemes under teaser rates have been hugely popular and prompt customers to switch over. Other banks may be forced to come up with similar schemes”.
After the base rate system becomes effective, the banks will have to halt this tactic since base rate system is believed to be more transparent system of loan costing as compared to BPLR.
The Chairman of a public sector bank said, “We are yet to take a final call. But the credit offtake has been low, and if their is a scope we’ll go ahead. A lot depends on the demand from the manufacturing sector, it has shown some signs of recovery”.