SBI Chief for Pricing Parity With HFCs on Home Loans
Nov 01, 2015
Arundhati Bhattacharya


Mumbai: State Bank of India (SBI) chairperson Arundhati Bhattacharya on Saturday called for ending the "regulatory arbitrage" enjoyed by pure-play home financiers, which can lend below their prime lending rates whereas banks cannot.

"If you ask me, there shouldn't be any regulatory arbitrage. Regulatory arbitrage always makes for an un-level playing field. And if you have a particular area that you are operating in, there should be level playing field so that the most efficient of them do the best job," Ms Bhattacharya told reporters on the sidelines of the Credai-BankCon summit here.

She admitted that the main reason for this arbitrage is the higher cost that housing finance companies pay for funds.

Ms Bhattacharya also pitched for the need of the controversial 'teaser' loans in the home loan segment as it helps borrowers reduce their interest burden.

"I still believe that there is a place for teaser loans, mainly because when people take loans, they need some breathing space in the initial days and as time progresses, the EMIs become easier (to pay) as salaries go up," Ms Bhattacharya said.

Within 2-3 years, the EMI does not hurt the borrower as in the first two years and so a variable EMI makes things easier, she explained.

Early this decade, the then SBI chairman Om Prakash Bhatt started off the trend of teaser loans, which after initial criticism was adopted across the industry.

But the then Reserve Bank of India Governor D Subbarao asked banks to end this, fearing a credit bubble and possible delinquencies as EMIs in teaser loans go up after the initial years of cheaper interest.

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