For Quick Alerts
ALLOW NOTIFICATIONS  
For Daily Alerts

ICICI launches teaser loans amidst rising rate scenario

|

ICICI launches teaser loans amidst rising rate scenario
ICICI Bank: Quotes, News
BSE 1095.85BSE Quote0 (0.00%)
NSE 1093.3NSE Quote0 (0.00%)
ICICI Bank, India's largest private sector lender, on Thursday launched a new teaser loan product which charges a fixed rate for one or two years and adjusts to a floating rate later on the base rate.

Amidst a rising interest rate scenario, where home loan rates have gone up 2-3%, the product would protect customers from frequent changes in home loan interest rates, ICICI said while launching the product on Thursday.

 

The bank launched the product right after its largest peer State Bank of India launched its popular teasers. The only difference in the ICICI Bank"s product is that the fixed coupon is linked to the base rate and in line with the current floating rate that customers would otherwise pay. SBI, on the other hand, only offers home loans at floating rates today.

 

From Friday, people applying for home loans with ICICI can fix the rate for a year at 10.5% for loans of up to Rs 25 lakh, 11% for loans of Rs 25-75 lakh and 11.5% for loans of more than Rs 75 lakh, the bank said.

If customers want to fix the rate for two years, the applicable rates will be 0.25 percentage points higher. The rates will readjust to the bank"s base rate “plus margin decided at the time of sanction of the loan" after the fixed period, the bank added.

Fixed-rate loans allow customers to pay at the same interest rate throughout the duration of the loan. In floating rate loans, the effective rate a customer pays changes in line with the bank"s monetary policies.

Though many of the experts are not impressed with bank's decision as interest rates are already on peak and they do not expect rates to go up by more than 0.5 percentage points from current levels. Other experts see it as an indication that the bank is not very sure about the interest rate scenario and is merely trying to protect its net interest margin by locking customers in for one or two years.

They feel its better to go for a floating rate loan rather than such teaser loans as this will help reduce the cost when the central bank does reduce its policy rates.

It is yet to be seen if RBI will react to this. Earlier for SBI it had forced the state owned bank for higher reserves against such teaser loans. Will ICICI bank also be made to swallow the hard pill.

GoodReturns.in

Read more about: rbi icici loan sbi interest rate
Story first published: Saturday, August 20, 2011, 14:04 [IST]
Company Search
Get Instant News Updates
Enable
x
Notification Settings X
Time Settings
Done
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X