Cheaper home loans to old customers not feasible

A month ago in January,the Reserve Bank had voiced concerns over 8216;teaser8217; rates. Later,it said the cheaper rates should be extended to existing borrowers as well.

8220;The IBA said if banks offer lower rates to old customers as well,this will affect their earnings as it is not feasible for them to change their deposit rates accordingly to

compensate this loss of interest arising from such a move,8221; an official of the Indian Banks Association said on condition of anonymity.

The central bank had sent two letters over the past two months to the IBA seeking an explanation on this issue of teaser rates,the official said.

On February 9,the country8217;s largest lender,State Bank of India,said that RBI has not objected to 8216;teaser8217; rates.

SBI was the trend setter in teaser rates. It offers the special home-loan at rates as low as 8 per cent for the first year. It was a roaring success and even rivals like HDFC,which initially termed the strategy as 8220;gimmick8221; followed SBI steps.