Leading home loan players which aggressively pursued fixed-cum-floating loans are not likely to respond to ICICI Bank’s ‘teaser loans’.
ICICI Bank, the largest private sector lender, on Thursday unveiled a dual rate product which charges a fixed rate in the initial years and adjusts to the market rate later.
State Bank of India (SBI) which pioneered teaser loan products in the country and Housing Development Finance Corp (HDFC), which followed suit, are in no mood to revisit the controversial product which drew flak from the Reserve Bank of India (RBI). RBI had prescribed standard provisioning for such loans be raised by five times.
While launching the home loan on Thursday, ICICI Bank said the product would protect customers from frequent changes in home loan interest rates. ICICI Bank's move is in line with the lender's emphasis on boosting its secured loan portfolio.
However, this time around, SBI is not likely to respond to ICICI Bank, since it is already feeling the pressure on capital and the risks of further deterioration in asset quality. In the last two quarters, the bank's capital adequacy ratio suffered on account of higher provisioning and the bank is in talks with the government for capital infusion.
According to a senior SBI official, the country's largest lender is now focusing more on sustaining profitability, a shift from its earlier stance of emphasising on increasing market share. SBI's gross non-performing assets ratio was up at 3.52 per cent in the quarter ended June, compared with 3.28 per cent as on March 31. “We have given up aggressive pricing that was undertaken to capture market share two years ago,” said a senior SBI official. The bank's focus on improving its margin was also evident from the aggressive lending rate rise, as its base rate was raised by 175 basis points since April.
After RBI expressed its discomfort, the new SBI management, which took charge in April, immediately withdrew the home loan scheme. “Our scheme worked well, the payment capability was assessed on a floating rate basis. But we do not want to have issues with the regulator,” said another senior SBI official.
HDFC, the leading home loan player in the country, is also not considering such a scheme at this point. “We are not planning to launch any dual home loan rate scheme,” said Keki Mistry, vice chairman and chief executive officer, HDFC.