HDFC, ICICI Bank and Corporation Bank decided to stop extending their teaser home loan schemes begining December 2010. On the other hand two of the country’s largest banks, State Bank of India (SBI) and Punjab National Bank decided to continue with their schemes till 31 December 2010. The move to withdraw the easer loans follows the concerns expressed by the Reserve bank of India (RBI) in the context of teaser loans in its November 2010 policies. RBI had asked banks to set aside higher capital 2% provision from 0.40% earlier on teaser loan schemes fearing that borrowers might find it difficult to service the loans once the normal rate of interest is applied.
SBI among the first banks to offer the scheme in 2008 was against RBI’s terming its special home loan scheme as teaser loan scheme.
Teaser-rate loans are multi-year loans that bear low monthly repayment in the initial two-three years. Indian banks used to offer fixed rate of interest in the first few years and a floating rate, which would be the prevailing rate of interest on a home loan for the remaining tenure of it.
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