According to a recent press report Mr. K.C .Chakrabarty, deputy governor, Reserve Bank of India has said the central bank has not banned the controversial teaser rates, but said banks may have to make additional provisioning for such loans.
Recently mortgage major HDFC launched a special home loan product giving borrowers the choice to choose fixed interest rate for the first 3 to 5 years after which borrowers would be shifted to floating rate.
Reports said that ICICI Bank had also launched a similar product. Mr. Chakrabarty when asked specifically if the recent product launches will attract additional provisioning, said, that he product will attract additional provisioning if the rule has stated so.
He said that a product which is neither fixed nor floating is called teasing and the interests which are both fixed and floating are called teasing.
Reports also said that the industry observers have said that these products have some characteristics that are similar to teaser home loan schemes, launched by the State Bank in late 2009 and imitated by others.
Reports added saying that the Reserve Bank had increased the provisioning for such assets five-fold to 2 per cent to avoid an asset bubble build-up.