SBI chief wants teaser loans back, ICICI Bank disagrees

 The two top lenders — State Bank of India and ICICI Bank — are not the same page when it comes to reintroducing the controversial ‘teaser loans’ which were shelved four years ago as the regulator flagged asset quality issues.

Pitching for the reintroduction, SBI Chairman Arundhati Bhattacharya has said, “I still believe there is a place for teaser loans, mainly because when people take loans in initial days, they need some leeway. But as time passes, a higher EMI does not pinch much as their salaries go up that can service a higher EMI.”

However, the largest private lender, ICICI Bank, which has a high exposure to home loans, is not open to the idea, saying standard rates are better.

“We’ve always been preferring standard rates over enticing options as in the former, the customer is aware from day one what the rate is,” said ICICI Bank Executive Director Rajiv Sabharwal.

“We believe that offering standard rates where rates remain uniform throughout the life of a loan is a much better proposition.”

Both were speaking to reporters on the sidelines of an industry event in the city over the weekend.

Teaser home loans are offered at a fixed low rate of interest in initial years, and are then adjusted to a higher floating rate for the remaining tenure.

SBI and other lenders had withdrawn such loans in 2011 after the then Reserve Bank governor D Subbarao expressed concern that such loans may pose a possible risk to asset quality.

Not exactly happy with the terminology, Bhattacharya made it a point to clarify that teaser loans are actually differentiated EMIs, or step-up loans, where the lender charges EMIs at lower rates initially and then restores it to higher rates.

For SBI, the teaser loan was such a hit that it could easily overtake the erstwhile market leader HDFC and become the numero uno home loan player.