Outgoing State Bank of India (SBI) Chairman OP Bhatt today strongly defended the special home loan rates (teaser rates) on which the Reserve Bank of India (RBI) had made no bones about its dislike.
"Obviously, they (RBI) have not understood our product (the special home loan product)," Bhatt, who is superannuating tomorrow after a five-year stint as chairman and a four-decade -old association, told reporters at the bank headquarters here today.
Under the special rates, pioneered by SBI, banks provide housing loans at lower rates for the first few years and later set interest rates according to the prevailing rates.
The RBI had expressed concern over teaser loans and has said that "banks must ensure that borrowers can service higher rates when rates return to normal."
The apex bank had also termed the teaser loans discriminatory, saying that banks were not letting their existing customers benefit from the current low interest rates.
Rebutting the RBI stance that SBI's special home loans are similar to the sub-prime loans in the US, Bhatt said this view is beyond logic as his offering is sold to those who are "absolutely credit-worthy." Sub-prime loans, under credit is extended without ascertaining creditworthiness of borrowers, in the US were among the primary reasons for the global slowdown in 2008.
Explaining that his product is fundamentally different from the US sub-prime, Bhatt said, "to begin with, our product is not sub-prime as the RBI is making it out to be. My borrowers are not the sub-prime types of the US, who had neither job nor any assets nor a source of income.
"On the contrary, my borrowers are employed, taxpaying and are credit-worthy citizens of this country," Bhatt explained, and stressed that his product is 100% transparent unlike the failed US product.
"All the details of the loan is documented both with the borrower as well as with the bank," he said.
Bhatt was, however, quick to add that this is not a defiant stance with regard to the regulator but this is the view point of a bank that is the industry leader with a quarter of the entire banking business under its fold.
"Being the industry thought-leader and market leader, it is the duty of SBI to articulate our views to the regulator. This has to be done in the interest of intellectual honesty and public discourse," he said
However, Bhatt was quick to add that "but if they still insist that this cannot be continued and is against its norms, then we will comply... That does not mean that we don't have a view point on this... Also, I would like to place it on record that so far, all through the five years of my tenure as the chairman, SBI has been 100% compliant with all the RBI regulations".
