The country's largest private sector lender ICICI Bank on Thursday said its recently launched fixed-rate home loan scheme will not attract higher provisioning mandated by the central bank for teaser loans.
"Additional provisioning is not required on this product because the fixed rate offered is similar to the current floating rate on our other home loans," a bank spokesperson told on the sidelines of a Ficci-IBA banking summit.
The bank had on August 19 introduced two home loan products, with interest rates fixed for the first and second years and from the third year onwards the then applicable rate will be charged.
On the rationale for launching this product, Managing Director and Chief Executive Chanda Kochhar had said on Tuesday that this was a product that was very predictable in terms of what the EMI burden on the customer would be.
"The product that we have launched basically gives a customer the option to lock-in into a fixed interest rate for one year or two years. It is not lower than the rate applicable on the floating rate loan we are offering now," Kochhar said.
The schemes were a reminder of the teaser loan offers that had disappeared from the market after the Reserve Bank expressed concern that these products affecting the asset quality of banks and asked them to make additional provisions for any such product.
To discourage banks from offering teaser rate schemes, RBI had increased the standard asset provisioning for all such loans from 0.4 per cent to 2 per cent.
Under the new scheme, an ICICI borrower will pay an interest of 10.50 per cent for a home loan under Rs. 25 lakh for the first year and for the following year the interest rate would be 10.75 per cent, the bank said in a statement.
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