State Bank of India's outgoing chairman Om Prakash Bhatt on Wednesday voiced disapproval of the Reserve Bank of India's attempts to discourage step-up ('teaser') rates on home loans, saying the central bank had not understood SBI's special home loans product.
Addressing the media in Mumbai at a farewell conference (his term comes to an end today), Bhatt also criticised RBI's moves to deregulate interest on savings accounts. RBI governor D Subbarao has set up a committee to study the consequences of freeing up of savings account rate, which is mandated at 3.5 per cent a year now.
Bhatt also said that the bank would take a decision on extending its special rate home loans, also referred to as teaser rates, today, his last day in office.
Bhatt said that none of the charges raised by the central bank against teaser loans apply to SBI's home special rate loans and the bank has therefore not made any additional provisions.
Last year, RBI made it more expensive for banks to extend step-up loans where interest rates are low in the first year and rise in subsequent years, on the grounds that these were risky and not entirely transparent.
Articulating the bank's stance on savings rate deregulation, Bhatt said that the bank had internally discussed the issue and was not in favour of savings rate deregulation as it would increase volatility and hurt state-owned banks.