In yet another case of a regulator’s stance being thrown to the winds, HDFC has decided to ignore the Reserve Bank of India’s observations
on teaser loans
Moneylife had earlier reported (see here) on how the RBI has repeatedly expressed its displeasure over teaser rates, saying that these schemes are unfair to existing borrowers.
But HDFC has gone ahead and launched a new dual-rate scheme, despite the clear stance of the central bank.
The financial institution today lowered its home loan rate to 8.25% for the first year in its dual-rate scheme, commonly known as a teaser loan, applicable on fresh loans.
Under the scheme, the country’s biggest mortgage provider would offer a fixed rate of 8.25% up to March 2011, then 9% for the next one year and the prevailing floating rate for the remainder of the loan tenure.
“This is a flexible product with dual rates. The fixed rates are applicable for all new loans irrespective of the loan amount,” stated HDFC.
The teaser rates have been a major issue in the home-loan market in the recent past, with public sector lender SBI walking away with a big pie of the market through its own teaser rates. A number of lenders, including HDFC, had followed SBI last year in offering teaser rates, but most of these offers were discontinued earlier this year in a rising interest rate scenario.
Although SBI has continued with its teaser rates, it had raised the effective interest rate on its scheme at the beginning of this month.
SBI has extended its 8% special home loan scheme till 30th April, but revised the rate for the second and third years to 9% from 8.5% earlier.
HDFC today said that besides the new dual-rate scheme, its existing floating rate product would continue without any change, where rates are 8.75% for loans up to Rs30 lakh, 9% for loans between Rs30 lakh and Rs50 lakh and 9.25% for loans of Rs50 lakh and above.
Announcing the new scheme, HDFC managing director Renu Sud Karnad said that the company received “overwhelming” response to its earlier dual-rate offer and its cost of funds has now allowed launching a “lower initial fixed rate.”
“This special offer is applicable to all new home-loan customers who apply before 30 April 2010, and take at least part-disbursement before 30 June 2010,” she added.
Without naming SBI, HDFC said that the effective rate on its new scheme was “very attractive” and “much better than other large players in the market offering similar products” for a loan tenure of 15 or 20 years.
SBI is the only other major player currently offering teaser home loan rates.
“We would also allow the option to all customers whose loans are fully undisbursed as of 14th April to convert to this product without any conversion fees,” Ms Karnad said, adding that the special rates would also be available to NRIs, persons of Indian origin and self-employed customers.
HDFC recorded a growth of 22% in loan approvals during the nine-month period ending 31 December 2009, to Rs44,110 crore, from Rs33,820 crore in the corresponding period last year.
Loan disbursements during the nine-month period ending 31 December 2009, amounted to Rs33,527 crore compared to Rs27,211 crore in the corresponding period last year, representing a similar growth of 23%.
The company said that its non-performing loans have also been declining on year-on-year basis for 20 straight quarters.