Thaindian News

Mumbai, April 20 (IANS) State Bank of India (SBI), the country’s largest lender, said Wednesday it will end the much-debated teaser home loan rates from May 1 to pacify the regulator’s concern.

“We are changing the interest rate structure of home loans which does mean a higher payout for customers. Also at the same time, it is in compliance with the RBI expectation of not making it a teaser loan or tiered loan,” SBI Chairman Pratip Chaudhuri told reporters.

The bank has restructured home loan. For housing loans up to Rs.30 lakh it will charge an annual interest rate of 9.5 percent, one percent above the increased base rate.

Interest rate on home loan between Rs.30 lakh to Rs.75 lakh will be 9.75 percent, 1.25 percent above the base rate and above Rs.75 lakh loan will attract interest rate of 10.25 percent, above 1.75 percent of the revised base rate.

“The new rates will be floating with the base rates. It will remain the same throughout the life of the loan if the base rate remains the same,” said Chaudhuri.

The new rates will be effective from May 1.

SBI Tuesday said it will hike its base rate by 25 basis points to 8.50 percent effective April 25 from the existing 8.25 percent.

The current home loan structure of SBI is a mixture of fixed and floating interest rates. It charges 8.75 percent in the first year, 9.50 percent in the second and third years and the prevailing floating rates from the fourth year onwards.

The Reserve Bank of India (RBI) had in the past expressed its reservations on the teaser rates offered by the country’s largest lender saying such aggressive rates might push housing prices and create bubbles in the sector.

Chaudhuri said he met RBI Governor D. Subbarao to discuss the home loan issue shortly after taking over the charge as chairman of the country’s largest lender early this month.

“Through the home loans we are delivering values to the customers but regulators said it was not in keeping with the interest rate structure that they would like to see and they have classified them as teaser loans,” said Chaudhuri.

SBI has also restructured its car loans scheme.

It has launched a new scheme called SBI Advantage Car loan under which it would provide credit at 10.75 percent for a maximum period of 7 years.

“The car loan scheme that we have had a very tiered and differentiated structure which the customers have been telling us is a bit complicated so we have made it very simple,” the SBI Chairman said.

“Now the rate will be 2.25 above the base rate. The effective rate will be 10.75 percent and repayment period will be 84 months,” said Chaudhuri.

Equated Monthly Instalment (EMI) on car loan of Rs.1 lakh for 7 year period will now be Rs.1,670.