Launching an exclusive product for the senior citizens, banks here are promoting the reverse mortgage loan scheme for their benefit.
While the Punjab National Bank (PNB) introduced this scheme in the market as ‘PNB Baagbaan’ on April 13, the number of enquiries has increased tremendously over this time period. Toeing the same line, the State Bank of India (SBI) has also geared up by launching ‘SBI Reverse Mortgage Loan’ on October 12.
The product will benefit senior citizens above 60 years of age. Where PNB is charging an interest rate of 10% per annum, SBI will be disbursing the loan at a rate of 10.75% per annum. Under this scheme senior citizens can avail minimum of Rs 3 lakh upto Rs 1 crore against the house for at least 20 years.
A senior official of PNB told FE, “The Union Budget proposals of 2007-08 included the introduction of ‘reverse mortgages’ in Indian markets. This novel product will enable a senior citizen to avail a monthly stream of income against the mortgage of his house. The main objective of the loan is to generate income, supplement the pension or other income for day-to-day requirements. To promote this product, we organize regular meetings, seminars for senior citizens and the response is good. But the conversion rate is quite low at present as people are not much aware of this scheme. And the mindset of the people is such that they’ll take time to adopt this new offering.”
The tenure of the loan is about 15 to 20 years for the 60-70 age group and 10 to 15 years for individuals aged above 70 years. In case of joint account, the minimum age of the spouse for availing the loan under these two categories shall be 58 and 68 respectively.
An SBI official shared, “We are trying to create awareness amongst the senior citizens about this scheme. They can avail loans, released in monthly or quarterly installments or as a lump sum payment at the beginning against the self-occupied property. Repayment or servicing of the loan need not be done during their lifetime. But after the death of the borrower, bank will give six months time to the legal heirs for repayment of loan. But if this option is not exercised, bank will sell the property and liquidate the loan.”
“The loan can also be useful in case of medical emergency, upgradation of business, house etc. We will sanction loan upto 90% of the property value. The property will be evaluated after every five years, and the installment amount can be re-adjusted accordingly.” he added.
Oriental Bank of Commerce and Allahabad Bank are also mulling to launch this scheme.