Banks will have to set aside about Rs 1,360 crore of additional money for home loans contracted under special home schemes or teaser home loan schemes.
This follows the RBI’s move on Tuesday to hike the provisioning requirement for special home loans from 0.4 per cent to 2 per cent. The move is aimed at capitalising banks in case there is a default when interest rates rise as the loan progresses.
Banks have now sought clarification from RBI on the exact definition of a teaser loan and also for how long banks would have to provide for these loans — whether it is for the entire duration of the loan or only till the special provisions exist. Banks that have special home loan schemes are State Bank of India, Canara Bank, Punjab National Bank, ICICI Bank and Corporation Bank, among others.
A Crisil report released on Wednesday estimates that around 20 to 25 per cent of banks’ outstanding home loan portfolio of around Rs 340,000 crore was linked to teaser rates as on September 30. This amounts to Rs 85,000 crore of loans outstanding in the teaser loan category, at the upper end.
This means the provisioning amount will go up from Rs 340 crore to Rs 1,360 crore for loans disbursed under special home loan scheme. For SBI, the amount of home loans disbursed under its special home +loan scheme of 8 per cent interest rate is about Rs 22,000 crore.
The additional amount of money the bank will have to set aside on account of this new provisioning would be about Rs 352 crore, a senior SBI official told Financial Chronicle.
“The impact would not be much. However, we will have to undertake a cost benefit analysis. The special home loans were targeted at customers for whom the interest component is very important. It helped many people across the country buy homes. The Happy Home Loan Scheme has become a brand in itself and the bank will find it difficult to withdraw it,” said the official.
KR Kamath, CMD of Punjab National Bank, said, “We would have to seek a clarification from RBI on the exact definition of teaser loans and for how long the banks will have to make the excess provisioning.”
In its report, Crisil said “While mortgages continue to have the lowest risk profile in the retail risk scale, a high proportion of teaser rate loans in the banks’ portfolio can increase delinquency risks in the long term. The significant increase in standard asset provisioning for these loans is now expected to discourage banks from extending further teaser-rate loans and lead to a rise in home loan interest rates.”
“The additional provisioning requirements for home loans will have a limited impact on us even though we have a special home loan scheme because we have not been growing our book actively,” said Chanda Kochhar, CEO and MD of ICICI Bank on Tuesday.
