Govt. and RBI head on for teaser loans

The Government and Reserve Bank of India might go hand in hand most of the times but they have different point of views when it comes to “teaser” home loans. In the Economic survey for year 2010-11, the government has shown considerable confidence in the efficiency of Teaser home loans.

Earlier the Apex Bank expressed its concerns about the teaser loans offered by the State Bank of India but the government is very much in favor such loans.

The Economic Survey for Year 2010-11 said, “The response of the market to this (terraced loan) was very good….Defaults on these (loans) have been negligible and cases of foreclosure rare. Also, these loans played a major role in promoting inclusiveness. Around 90 per cent of the home loan borrowers were first time home buyers.”

Under the teaser loan scheme the banks charges a fixed rate for first few years of re-payment and then offers floating interest rates for the years to follow.

The primary concern that the central bank pointed out in its monetary policy review is that it might be difficult for some borrowers to handle the burden of the normal interest rates as they are considerably higher than the rates applicable in the initial years.

The survey said that the teaser home loan scheme has prompted many new home buyers to enter the market. The survey also advocated the fact that in order to offer customers with range of options, the banks must be given freedom to introduce new products.

Banks asked to make more use of IT systems: RBI

The high level committee headed by the Deputy Governor of RBI Mr. K C Chakrabarty has prepared a vision document for 2011-17 and has advised banks to introduce more and more technology in the banking systems. Such a practice is most likely to bring down the operation costs and will serve the customer needs to a better extent.

In recent years banks have introduced various modern day facilities in their operation but still they are at the very initial stage. The report states that “Although banks have deployed technology for transaction processing, analytical processing by banks is still at a nascent stage.”

The Committee has specifically emphasized to make three C’s i.e cost, control and customer services more efficient by deploying proper Information Technology Tools in the banking operations.

Mr. Chakrabarty said “Technology should work for the business in its aim to make its products and services relevant and accessible to its customers, instead of a fixed sunk cost that sits heavily on a bank’s P&L account.”

RBI to amend banking license guidelines

The Reserve Bank of India is all set to bring amendments in the in the guidelines for issuing of new banking licences. The revised guidelines are expected to be effective by the end of current fiscal year.

While presenting the Union Budget the Finance Minister Mr. Pranab Mukherjee said "RBI is planning to issue the guidelines for banking licences before the close of this financial year."

Soon after the announcement, the Central Bank asked for the opinion of stakeholders about the same.