Several banks, including the country’s largest lender, the State Bank of India
The central bank, which had outlined the proposal in the November monetary policy announcement, formalised the new provisioning norms on Thursday evening. With this, banks will have to set aside a slice of their earnings from teaser loans — special loans where borrowers paid a lower interest rate in the first few years.
SBI is likely to take a hit of Rs 350 crore on account of these new norms, where the standard asset provisioning on all such outstanding loans has gone up to 2% from 0.40% earlier. With this, the banking regulator has also turned down banks’ request that it should be implemented with prospective effect.
The RBI circular further states that “the provisioning on these assets would revert to 0.40% after one year from the date on which the rates are reset at higher rates if the accounts remain ‘standard’”.
The central bank has also sought to define teaser loans as the ones where the rates are comparatively lower in the first few years, after which rates are reset at higher rates. After the earlier policy announcement, SBI chairman OP Bhatt had asked the banking regulator to define teaser loans. Speaking to newspersons on Thursday, Mr Bhatt said the bank would take a call on teaser rates by the end of this month.
Bank chiefs had also vehemently opposed the move to increase provisioning, saying that they followed prudent lending and repay assessment practices while sanctioning the loans.
Several banks had chosen to withdraw such schemes. At the moment, only SBI and Punjab National Bankoffer such schemes. While SBI has said it will be reviewed at the end of this month, PNB has decided not to extend it beyond December 31. Mortgage lender HDFC , which was offering such a scheme till recently, will, however, not be affected as the directive is addressed to the banks alone.
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