In quick succession, ICICI Bank and HDFC Bank have come out with a new version of combined fixed and floating home loan products, rekindling the issue of teaser home loans yet again. The second coming of these loans shows that the home loan market has expanded enough for competition to peak. Other banks that have also announced their intention to tap the retail sector aggressively will soon offer their version of the scheme. These could include State Bank of India, the pioneer in 2009. RBI deputy governor KC Chakrabarty has also said that the regulator is not inclined to put a halt to the schemes as long as banks make the extra provisioning of 2% instead of 0.4%. The higher provisioning will dent the profit margins but the revival of the teaser loan shows that the banks still see money in it. Teaser loans undoubtedly pushed up the credit offtake for housing loans last year and gave the middle class much-needed relief from the increasing interest rates. The size of the home loan market at the end of July this year—at R3.61 lakh crore—makes it difficult for RBI to push banks beyond a point. For banks, the strategy of teaser loans works profitably when the income stream of the borrowers is carefully assessed. At a moment when the interest rate is peaking, the timing of the teaser loans can be questioned as they block new customers at higher rates. But, given that credit growth is sluggish at 2.5% in the current financial year till August as compared with 3.8% in the same period last year, banks need the home loan sector to move.
FE
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