Amid concerns expressed by the Reserve Bank of India, State Bank of India (SBI) on Wednesday announced the withdrawal of special home loan schemes or teaser rates with effect from May 1.
SBI Easy Home Loan and SBI Advantage Home Loan (teaser rate products) will be replaced by floating interest rate schemes on a par with other commercial banks.
Under the teaser home loan scheme, SBI was offering lower interest rate of 8-8.5 per cent for the first three years.
It invited severe criticism from the RBI, which had said the scheme could impact the asset quality of the bank's home loan portfolio. The withdrawal of teaser rates comes within a month of new Chairman Pratip Chaudhuri taking charge at SBI.
The home loan from SBI will now attract an interest rate of 9.5 per cent to 10.25 per cent depending on the loan amount, SBI said.
SBI has also launched the SBI Advantage Car Loan scheme, under which credit will be provided at 10.75 per cent for a maximum period of 7 years.
The withdrawal of teaser rates follows the bank hiking its lending rate by 25 basis points, making loans across segments costlier.
Under the new floating rate scheme, loans up to Rs.30 lakh would attract an interest rate of 9.50 per cent and those between Rs.31 lakh and Rs.75 lakh, 9.75 per cent. Credit above Rs.75 lakh would attract 10.25 per cent.
SBI had launched the teaser home loan schemes in August 2009, in the aftermath of the global downturn.
It said in the last few quarters the status of the residential real estate market had experienced upward pressure on prices across cities.
“Taking cognizance of the above and also taking note of regulatory concerns, the bank has decided to withdraw SBI Easy Home Loan and SBI Advantage Home Loan with effect from May 1,” SBI said in a statement.
Following concerns expressed by the RBI, leading lenders, including ICICI Bank and HDFC, discontinued their teaser rate schemes.
Teaser loans have been a hit with customers but the RBI had raised concerns that it might become a burden for them when rates begin to rise after the initial 2-3 years and may increase the default rate.