Teaser loans may soothe realty inventory pain, SBI hints to RBI
22 Aug 2015 4:25 AM IST
“I am told that real estate stock is at two-year high and I was thinking if it is possible for a little while... could something of this (teaser loan) kind could be allowed given the fact that this is one of the portfolio where NPAs are the lowest,” SBI Chairwoman Arundhati Bhattacharya told Reserve Bank Governor Raghuram Rajan at a conference here.
Rajan acknowledged the <g data-gr-id="35">demand,</g> but did not appear very keen to accede and said that the larger need is to push demand by a price cut by the builders. “I think we need the market to clear. With growing unsold stock, we need to see the ways to do it.
“Some of it might be by making loans easier, but we also don’t want to create a situation where prices stay high at the level which means demand can’t pick up,” Rajan said at the SBI Conclave.
It would be a “great help” if <g data-gr-id="33">realty</g> developers sitting on unsold stock bring down prices, he said, adding that once the prices stabilise, more people will be keen to buy houses. Echoing the need for developers to bring down prices, Bhattacharya reminded Rajan about the introduction of the teaser loan product, where it used to lend below the base rate or the minimum rate of lending, saying the product was able to revive demand in the days after the 2008 crisis. “In 2008 when the economy started faltering, one of the things that made demand go up was the 8 per cent housing loan that SBI did.
Of course at that time it was tagged as a teaser, we in SBI refute that because the due diligence that went in for those loans <g data-gr-id="36">are</g> the same for other loans as well, even your eligibility was same as
regular loans.
“Only <g data-gr-id="31">thing is that</g> for the first two years the customer is allowed to pay at a lower rate. What did happen was that demand really kicked in,” she said. There was an intense fight between the RBI and the bank over this product and the then SBI Chairman O P Bhatt had gone to the extent of saying that the regulator did not understand the product.
Rajan said he believes that if real estate developers, who are sitting on unsold stocks, bring down the prices, that will be a very great help to
the sector.
Difficult to give fresh loans to NPA accounts: SBI
Country’s largest lender State Bank of India on Thursday expressed concerns about giving fresh loans to accounts which have become <g data-gr-id="51">non performing</g> assets (NPA) and said the banks do not have any incentive by doing so.
“You can say the regulator has allowed it, that it was required in order to revive (the account), but
the question is that it is very difficult to manage.
“As a result, most banks don’t have any incentive once it’s treated as an NPA to do anything about it,” SBI Chairperson Arundhati Bhattacharya said.
She said the moment an account is declared NPA, giving further money to it, and very often this is required for stressed assets, becomes almost
impossible.
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