The finance ministry may bar PSBs from launching fresh teaser loan schemes, as it looks to prevent a rate war that could lead to an increase in non-performing assets with the lenders. Teaser loans schemes offer a low fixed rate in the initial years, but shift to market rates after 2-3 years.
HDFC and ICICI Bank relaunched their teaser loan offers this month after State Bank of India decided to continue with its offer, despite credit-tightening measures taken by the RBI. The ministry is keen to stop more public sector banks from offering teaser rates ahead of July 1, when the more transparent ‘base rate’ regime for loans comes into effect.
The government may further ask public sector banks to give details of the number of loans processed under such schemes. Amongst the public sector banks, SBI, Canara Bank, Union Bank of India and IDBI have teaser loan schemes.
Once the base rate comes into existence, the banks will have to redraw their strategy as base rate system will increase the transparency on fixation of reference rates for floating rate loans, said a senior banker who asked not to be named.
According to estimates, since the teaser rate regime kicked in, loans totalling nearly Rs 45,000 crore have been sanctioned. SBI accounts for over 66% of this, lending almost Rs 30,000 crore since February 2009.
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