The country’s largest public sector lender, State Bank of India (SBI), has extended its special home loan scheme, popularly known as teaser rates, by two months even as the two largest private lenders, ICICI Bank and Housing Development Finance Corporation (HDFC), decided to let their similar schemes lapse.
Only these three banks were continuing with teaser rates, a scheme under which home loan seekers are charged a fixed rate of interest for the initial years and a floating rate thereafter.
Other lenders had decided to terminate teaser rate schemes at the end of March.
A senior SBI executive said the bank had decided to extend the scheme, which was to expire today, since it was popular with customers and the bank's liquidity was good. The scheme would now run until June, the executive said.
Under this scheme, SBI is offering home loans at a flat 8 per cent rate of interest for the first year and 9 per cent for the second and third years. From the fourth year onwards, home loans up to Rs 50 lakh would be charged an interest rate of 9.25 per cent, while higher loans would attract 9.75 per cent interest rate.
SBI’s teaser rate scheme was to originally expire on March 31 this year, but was extended by a month.
ICICI Bank and HDFC Bank have, however, decided to end their teaser rate schemes.
“We have no plans to extend the (special) home loan scheme,” said an ICICI Bank spokesperson.
Although popular with home loan seekers, teaser rates had drawn flak from the Reserve Bank of India, which said it benefitted only the new customers.
Bankers said SBI had pioneered the scheme at a time when liquidity was abundant but now RBI was trying to squeeze excess liquidity from the system by increasing policy rates.
Banks have already increased deposit rates and are expected to respond with rate hikes once demand for loans increases in the second quarter.
The introduction of teaser rates by SBI had forced other lenders to launch similar products.
HDFC, which had initially termed the teaser rates as gimmick, joined the bandwagon later as it could not afford to stay out of competition.
