Citing RBI pressure, SBI withdraws teaser home loans

The State Bank of India (SBI) has finally put an end to its most innovative and wildly successful home loan scheme from May due to concerns raised by — and pressure from — the Reserve Bank of India (RBI).

The bank also cited high real estate prices as one of the reasons.

The SBI Easy Home Loan and SBI Advantage Home Loan, popularly known as ‘teaser’ loans, will be replaced by a new floating rate product at competitive rates, the bank said.

Under this, loans up to Rs30 lakh will be priced at 1% above base rate (current effective rate being 9.50% per annum), loans above Rs30 lakh and up to Rs75 lakh will be priced at 1.25% above base rate (current effective rate being 9.75% per annum) and loans above Rs75 lakh will be priced at 1.75% above base rate (current effective rate being 10.25% per annum).

Effective April 25, SBI’s base rate will be 8.50%.
SBI’s chairman Pratip Chaudhuri assured that the withdrawal of the scheme will not affect the existing borrowers.

“The scheme does not affect existing borrowers who avail the loans sanctioned and disbursed before April 30, 2011,” he said.

SBI did not make any provisioning for the loan scheme till December. Chaudhuri said the bank is in dialogue with the RBI on this, and one of the preconditions was that SBI should discontinue teaser loans.

Chaudhuri feels the withdrawal will not impact growth of home loans for the bank.

“We have tried to compare pricing with our competitors (ICICI and HDFC). We feel our pricing is quite competitive. It should not affect our growth.”

Analysts, too, view it as a positive. “SBI’s net interest margins (NIMs) were under pressure due to this. We see the outlook on NIMs improving,” said Vaibhav Agrawal, vice-president (research), Angel Broking.

But experts feel putting an end to this scheme will have an adverse impact on growth.

“Now SBI’s home loan rates are like those of any other bank. This could have an adverse effect on the bank’s growth rate,” said Harsh Roongta, chief executive officer, Apnapaisa.com, a personal finance and loans comparison portal.

Total home loans outstanding at SBI, which launched the teaser scheme in 2009, stood at Rs86,000 crore as of March 31.

The bank also revised its car loan scheme. From May a new product named “SBI Advantage Car Loan” will be launched. The rate of interest will be 10.75% (or 2.25% above base rate).

However, the bank has decided that there will be no prepayment penalty on home loans and car loans.