Mumbai, Jan 12 (Inditop.com) The practice among commercial banks of attracting customers with lucrative interest rates on housing loans only to convert it into floating rates later is a cause for concern, Reserve Bank of India Deputy Governor Usha Thorat said Tuesday.
“In the area of housing loans, teaser rates are increasingly being offered which is a cause for concern,” said Thorat at a banking conclave here.
“I hope banks are ensuring that borrowers are well aware of the implications of such rates and the appraisal takes into account repaying capacity of the borrowers when the rates become normal.”
The shift from lower interest rates to floating rates has often resulted in the monthly instalments of borrowers to shoot up by as much as 50 percent, along with the risk of the tenure of repayment also getting extended by several years.
Major housing loan providers including State Bank of India, which controls about 25 percent of the total loans and deposits of the country, and top private institutions like ICICI Bank and HDFC have been offering such teaser interest rates.
The central bank’s concern also comes against the rising number of bad loans.
