“Since early 2009, banks (both nationalised and private sector banks) started offering teaser rates for new home loans in the range 8-8.5% for the initial year to attract more borrowers and improve their credit scenario, which was deeply affected by the economic meltdown,” says Alok Chowdhury, a senior executive officer working with State Bank of India (SBI), Dunlop branch. Mr Chowdhury, however, refused to comment on the bank’s intention regarding the withdrawal of the special home loan scheme. Taking the plunge The first to exit the ultra-cheap housing loan segment is Axis Bank. The bank has withdrawn its special home loan scheme last week. However, it has decided to continue with the 8% fixed rate home loan scheme for the first year. Next to follow is Union Bank of India (UBI), which has opted out of the scheme from February 15, 2010. Canara Bank has also decided to discontinue with the scheme from February 20. According to sources, HDFC Bank has decided to extend the aforementioned scheme till the end of this month, while SBI is planning to continue the scheme till end of March. “Of late, banks are planning to withdraw the special home loan scheme mainly to bring in transparency in the home loan segment. Besides, the existing gap between the prime lending rates (PLR) and interest rates on home loan is irrational and is not a very good business tactic,” says Somnath Adhikary, senior manager of Allahabad Bank, Shyambazar branch, Kolkata. Furthermore, industry experts opine that this move by banks to hike the interest rates on home loans is also in line with RBI’s recommendation to banks to follow a common base rate system, which will consequently replace the prevailing PLR system with effect from April 1, 2010. |
In an endeavour to adhere to the views expressed by the Reserve Bank of India 
