BUSINESS
The outgoing SBI chief defended the popular product saying it is totally transparent and secure.
Om Prakash Bhatt, whose term as the chairman of State Bank of India (SBI) ends today, feels the Reserve Bank of India (RBI) has not understood the bank’s most popular product — the special home loan scheme.
“The loans are totally transparent. The selection of the borrower is such that it is given to creditworthy individuals. RBI has not understood our product,” Bhatt said on Wednesday.
“The special home loan product is not at all similar to the products available in the global market. In America, the home loans which were given, due to which the subprime crisis was caused, were given to people who had no jobs, no income, no assets. Our loans are given on job or income. To see the exact salary, we ask for the income tax deduction certificate. Affordability and eligibility are given due consideration while giving the loan,” he said.
“We tell the borrower what will be the EMI (equated monthly installment). It is totally transparent,” he added.
The outgoing chairman said he had put these arguments in front of RBI. “If RBI agrees with it, then there are no issues. If they do not agree with it, then whatever the regulator will say, we will do.”
Bhatt assured that SBI is 100% compliant with everything the RBI has mandated. “During my tenure, there has been no deviation from any compliance not only in India but in all the 32 countries that we operate,” he said.
SBI did not make any provisioning for special home loan scheme till December. However, should the regulator require it to, the bank would have to set aside Rs200-300 crore, he said.
The final decision on whether to extend the special home loan scheme will be taken today, Bhatt said.
On deregulation of savings rate, Bhatt said it’s status quo for now.
“In the interest of public sector banks, it should not be de-regulated. We are 72% of the banking market. But we are the banks which do most of the developmental activities in this country. If we are weakened by higher costs of deposits, our ability to do the kind of work that we do will get impaired.”
Bhatt also said that if the savings rate gets de-regulated and interest rates go up and down, the small savers will find it difficult.
There is also a possibility that a bank may come up with certain conditions under which they would provide higher interest to customers only if they maintain a certain minimum balance in the bank account.
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