State Bank of India (SBI) has got a breather on its controversial special home scheme as Reserve Bank of India has asked clarification from the bank. The communication from RBI reached SBI last weekend.
“We have received communication from RBI seeking clarification on certain issues relating to our special home loan scheme. We will send a reply by this weekend,” a senior SBI official said.
The SBI had written to the RBI soon after it had raised provisioning amount on teaser home loan scheme to 2% from 0.4% clarifying that the bank’s special home loan scheme couldn’t be termed as teaser, and hence, the bank didn’t have to provide any extra capital.
However, RBI hadn’t replied to the SBI earlier and the bank has been reviewing and relaunching its scheme after end of every quarter.
SBI had conducted a high level meeting under Krishna Kumar, MD of SBI, to review the situation where the bank may have to modify its special home loan scheme. “We haven’t decided anything on the scheme and it continues as it is,” said the official.
Meanwhile, sources at.RBI said the central bank may ultimately ask the bank to provide at 2% for its special home loan scheme. “Our stand is very clear. Any home loan product having feature of both fixed and floating rates will fall under teaser home loan scheme. SBI product is neither fully fixed nor fully floating. The new customers of SBI are being attracted with low fixed rates but may have to pay higher floating rates afterwards. We don’t want to encourage this product,” sources at RBI said.
Soon after taking over as the new chairman of SBI, Pratip Chaudhuri had hinted that the bank?s special home loan schemes may be modified since the higher provisioning norms for such assets of 2%, as prescribed by the regulator, were beginning to hurt.
?We are continuing with the schemes at present. At the same time, we are in dialogue with RBI and will try to address the concerns of the regulator, deliver value to the customer and also make sure the provisioning is affordable,? said Chaudhuri.
Chaudhuri’s predecessor OP Bhatt, who was instrumental in growing SBI’s home loan portfolio with the special home loan scheme, had staunchly defended the product. Reiterating RBI?s stance that SBI?s special home loans are similar to the sub-prime loans lent in the US in the run-up to the 2008 global financial meltdown, Bhatt said this view is beyond logic as his offering is sold to those who are ?absolutely credit-worthy.?