Reserve Bank Deputy Governor R Gandhi today asked lenders to be more financially innovative in designing home loan products and suggested creation of a periodic deposit-linked facility.
“There is a need with respect to financial innovation, with respect to loan products. One such product would be savings-induced home loans or a home loan deposit,” Gandhi told a gathering of realty players here.
Gandhi, who handles banking operations and development at the central bank, said such a product will help lenders understand their customers in a better way on parameters like repayment capacity and also make the margin money available for the property purchase.
“The willing customers may be induced to generate a savings balance by way of monthly or periodic deposits,” he said, adding that home loan can be sanctioned after the deposits reach a certain threshold.
The amount deposited by the customer can act as the margin money for the down payment or as a collateral, he said, adding, if implemented, the lender will get an exact idea about the repayment capacity of the future borrower based on the deposits made during the period.
It can be noted that first innovative home loan product was the teaser-loans launched by the nation’s largest lender SBI in 2009-10. Despite initial criticism, it was lapped up by the mortgage leader HDFC and then almost everyone else.
Launched during the days of high liquidity and at a time when the realty sector was rocking, the central bank under the then Governor Duvvuri Subbarao frowned upon the product. Citing possible asset bubbles and higher default rates as the loan tenor matures, the central bank forced lenders to discontinue the product.
In his speech, Gandhi lambasted real estate developers for flaying the bankers and the cautious stance of the RBI for their liquidity issues.
“Due to the ability of the sector to wreck havoc in the financial world, of which there are some precedents, the RBI will continue to be cautious,” he said, adding, “we do not have a negative mindset towards the sector, but rather we are sensitive.”
“The RBI does not want rapid flow of credit towards the sector which may result in asset price bubbles,” Gandhi added.
On the repeated calls for allowing money from the pension funds and insurance into the sector, Gandhi said people need to be sensitive to the fact that the restrictions are due to some purpose, adding there is an element of trust in these corpuses.
“There is competing demand from various sectors for capital and banks have to balance it out,” he said, adding, there is also the need to temper the expectations.
On the realty players’ refrain that money from private equity funds is easier to get rather than from banks, he reiterated that banks deploy money collected from depositors and do not raise funds of their own.
Taking on the realtors for complaining about high interest rates, Gandhi wondered how they are fine paying 20-40 per cent returns to their private equity investors and complain at the same time a 10-14 per cent interest rates charged by the lenders.
Listing initiatives of the RBI on the sector, including the July notification to include affordable housing in the infrastructure segment, Gandhi said the RBI will periodically review the definition of what constitutes affordable housing on the basis of inflation.
Meanwhile, on the poor response to the mortgage guarantee companies concept, which have received only one taker till now, Gandhi said the RBI is analysing the reasons for the lack of interest.