RBI might take stringent actions against teaser loans

The Reserve Bank of India has always been concerned about the teaser home loan schemes offered by the lenders where the interest rate remains fixed for first few years and then it goes floating. The largest lender in the country State Bank of India used to offer such a loan scheme but it was withdrawn when RBI pressurized it to do so.

The major concern of RBI is the rise in the defaults in repayment once the interest rate shifts to floating interest rate scheme. Aware about the criticism from the umbrella banking body, the largest private sector bank in the country launched two home loan schemes that with both fixed and floating interest rate elements.

There is no such ban on teaser loan schemes but concerned about the side-effects of such schemes, the Governor of RBI has alluded that actions may be taken against tease loan schemes, is they continue to be a matter of concern.

RBI must try to keep issuing of bank licenses free from controversy

Considering the 2G scam, the Reserve Bank of India must adopt a prudent approach towards issuing of banking licenses, the umbrella banking body must take relevant steps to avoid issuing of bank licenses to create any such controversy.

The banking licenses are as valuable as the telecom licenses were and hence it is very much necessary for RBI to keep the proceeding as transparent as possible. RBI must make the entire eligible group to bid for the banking licenses and thus RBI would be able to make optimum utilization of the resources.

RBI should issue very limited number of licenses and then can invite application for the next bidding after a certain period of time.

Chances of yet another hike in the policy rates

Even after 11 consecutive hikes in the key policy rates of the Reserve Bank of India there is still scope for some more events of rate hike to occur. The Deputy Governor of RBI, Mr. K.C. Chakrabarty has said that the umbrella banking body in the country will continue with its anti-inflationary stance despite of the signs of slowdown in economic growth rate of the country.

The economists at Nomura Securities said "From a policy perspective, we expect the RBI to remain focused on bringing down inflation, ignoring signs of slowdown in growth, as both headline and core inflation are expected to remain elevated for the next few months. Therefore, we expect RBI to implement a final 25-basis-point repo rate hike in this cycle on September 16 and then stay on hold."

Final guidelines on banking licences to be released soon

Many a private corporate houses are waiting for the declaration of the final guidelines from the Reserve Bank of India on the issuing of the banking licences, much concerned about it the Finance Ministry has shared its views with the RBI on the matter.

The Ministry has suggested setting the promoters contribution to be at least 40% which cab be brought down after tenure of 7 years but the RBI proposed the tenure to be of 5 years. It is expected that the final guidelines for the issuance of banking licences will soon be made available for public comments by RBI.

D. Subbarao to retain his post for two more years

The serving tenure of the present governor of Reserve Bank of India, Mr. D. Subbarao has been extended by 2 years and now will serve the post till 4^th September 2013.

Statement from the Prime Minister’s Office said “The Prime Minister has approved the extension of the term of Dr Subbarao as Governor of the Reserve Bank of India for a further period of two years with effect from September 5, 2011 up to September 4, 2013.”

Considering the present global economic situation and the effect of the crisis in the United States of America this step has been taken; as assigning this high post of responsibility to an altogether new person might have consequences and so the government has shown confidence in present Governor.

Mr. Subbarao has been on this post since 2008, when he guided the country through the threat of global recession. It is under his guidance that the frequency of monetary policy reviews was doubled to eight times an year in order to reduce the need for off-cycle rate moves.

RBI panel suggests uniformity amongst old and new customers

Several changes have been suggested by the committee to Reserve Bank of India on the customer services by the banks. The panel has even suggested to uniform rates for the new as well as old borrowers that belongs to the same class. The committee was headed by the former SEBI Chairman Mr. M. Damodaran.

The committee said "In a floating interest rate scenario, when an entire class of borrowers has the same characteristic and risk level, the point of entry in time (old customers and new customers) should not create discrimination in interest rate offered to the customers."

It also said "Banks should not impose exorbitant penal rates towards foreclosure of home loans and a policy should be devised to ensure that the customer is not denied of opportunity to enhance his economic welfare by making choices such as switching to other banks/financial entities to enjoy the benefits conferred by market competition."

There has been a constant argument going that the banks offer better terms to the new borrowers as compared to the old ones, the report suggested that instead of a whole package the lender must design products the are appropriate for the customer and suits his requirements.