Govt. supports SBI's teaser loan

Govt. supports SBI's teaser loanIt's a good news of SBI boss O P Bhatt as finally government went on his side on home loan issue after long rounds of meetings and discussions.

There is a long-time conflicts of policy between RBI and banks specially SBI over "teaser rates". RBI wants a clear policy about these flexible-rates loans and wants more capital set aside against loans. Now according to media reports, government has cleared its stand on this. Government official said these loans should be called "terraced" loans.

These types of loans were previously offered by majority of banks to their customers. In these products, initially interest rates remains fixed, and then become flexible after a certain time. This results in increase in the amount of installments with time.

Recent Economic Survey also supported business of these loans claiming them a "successful model". Survey says that a number of people got their homes with these loans. Alone SBI sanctioned 28,000 such loans, amounting to be Rs. 3,273 crore. Several rival banks demanded RBI to check this approach of lending.

With their protests against such loans, RBI came with rule that banks should set aside more capital in order to deal with potential defaulters. This move of RBI was only to discourage bankers. But government is not in accordance with RBI's new ruling stating banks and financial institutions should get more freedom to introduce their products.