ICICI, HDFC withdraw teaser home loan scheme

Private sector lenders ICICI Bank and HDFC on Wednesday discontinued teaser home loans , under which customers get credit at concessional rates for the first few years, in a move that reflects Reserve Bank of India 's concern on such loans.

It could not be ascertained whether State Bank of India, which pioneered this scheme, would discontinue it too.

According to sources, HDFC's scheme of dual rate home loan, which was to expire on Wednesday, will not be extended.

ICICI Bank has withdrawn the teaser rates on home loans with immediate effect, a bank spokesperson said.

Under teaser rate, HDFC offered home loans at a fixed rate of 8.5 per cent up to March 31, 2011, 9.5 per cent for a period between April 1, 2011 and March 31, 2012, and the applicable floating rate for the balance term.

Similarly, ICICI Bank had offered a rate of 8.5 per cent in the first year, 9.25 per cent in the second year and 1.5 per cent over and above the base rate in the third year.

It may be recalled that in its policy review meeting last month, RBI had voiced concern over the high risk of default on loans offered at teaser rates. However, then many banks had expressed reservations, arguing loan off-take would be impacted adversely.

The move by the top two private sector banks would temper the demand for housing loans and eventually help cool real estate rates in an economy faced with high inflation.