Thursday, February 11, 2010

Indian Central Bank RBI Scolds Banks On Home Loans

. Thursday, February 11, 2010

By stockOzone team

The central bank has stepped in to help home loan customers who opted for floating interest rates but have not get any benefit in almost two years.

The RBI has sought clarity from the Indian Banks Association (IBA), asking why new home loan buyers were lured by lower interest rates but the lower rates did not apply for existing borrowers.

In the letter written to the IBA, the RBI wants to know how existing borrowers are getting the benefit of reduced home loan rates.

Most of the schemes announced with reduced rates are applicable only to new customers and this has been a point of contention among existing borrowers.

Latha Venkatesh, CNBC Banking Editor, reports the RBI’s letter almost accuses banks of being discriminatory. The “problem” is for customers who have floating home rates,” says Venkatesh.

Customers expect that interest rates will fall but the experience in one-and-half years has been that banks have not passed on the rate cuts to customers though the RBI has slashed interest rates.

Banks have offered lower rates for new customers but not to their existing ones. RBI has flayed this policy in its “very, very hard-hitting” letter to the Indian Banks Association.

The letter is written in a series of questions and in it the RBI is almost accusing the banks of being discriminatory.

The IBA, on its part, has told the central bank home loan rates cannot be made uniform for all but added it would take up the matter with banks’ chief executives.

The IBA, however, admitted the downward adjustment for lending rates was slower than it should have been, sources said.

Disclosure: Author does not own any of the stocks discussed here.





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