With some lenders averse to discontinuing the controversial teaser rates offered on loans, Chief Economic Advisor Kaushik Basu today called for setting up a regulatory authority to monitor such schemes.
“Instead of banning, we can have independent experts who can prescribe about them like doctors prescribe steroids. My view is we can have a professional body who will have the right to say whether you are making a good judgment or not...,” Basu said during a summit at the International Management Institute.
Recalling the role of teaser rates in the US subprime mortgage crisis, Basu said the action announced by various banks to regulate these schemes should be decided on a case-by-case basis. “I am acutely aware of over-regulation. At the same time, there is no getting away from regulation. Having a prescription means there are dangers, but also there are values in the product,” he said.
