SBI Launches FlexiPay Home Loan Scheme

Published on: Feb 3, 2016 @ 04:22

State  Bank  Of  India  (SBI)  on Monday  launched  a  new  home  loan  scheme,   ‘FlexiPay  Home  Loan’.  With  new  home  loan  scheme,  SBI  offers  higher  loan  amount  and  up  to  five  years  of  interest  moratorium.

Under  this  new  home  loan  scheme,  the  borrower  needs  to  pay  only  the  interest  component  in  the  early  years,  thereby  it  increases  the  loan  eligibility  for  the  customer  by  up  to  20  per  cent.  It  offers  a  repayment  option  of  lower  EMIs  in  the  initial  years,  followed by  higher  EMIs.

The  new  scheme  offer  will  enable  young  working  professionals  to  get  a  higher  loan  amount  compared  to  their  loan  eligibility  under  normal  schemes.

“To  lower  the  impact  of  such  additional  loan  amount  on  monthly repayments  in  the  form  of EMIs,  the customers  availing  home  loan under  the  scheme  will  also  be  offered  the  option  of paying  only interest  during the  moratorium  (pre-EMI)  period  of  3  to  5  years,  and thereafter, pay  moderate  EMIs,”  SBI  said  in  a statement.

The  new  home  loan  is  aimed  at  salaried  individuals. The  upper  age  limit  for  this  scheme  is 45  years. Given the  target  group,  the  bank  offers  loans  with  a  repayment  tenure of  25  to  30 years  under  the  scheme. However,  customers  can  make  prepayments  towards  their  home loan without  any  prepayment  penalty.

Last  year,  SBI  chairman  Arundhati  Bhattacharya  had  suggested  to  RBI  governor  Raghuram Rajan  that  banks be  allowed  to  reintroduce  ‘teaser  rate’  home  loans. But,  Raghuram  Rajan had  then  turned  down  the proposal.

SBI  had  launched  a  loan  scheme   earlier  which  came  to  be  called  ‘teaser  loan’. Teaser  loans are  those  where the  interest  burden  is  lower  in  the  initial  years  but  rises  subsequently.  It offered  lower  interest  rates  in  the beginning  but  higher  EMIs  later  on.

Rivals  initially  criticized  SBI, but  soon  they,  too,  followed  it  up  with  similar  schemes. Critics  had  warned  this would  create  a  credit  crisis  and  if  the  overall  economy  falters borrowers  would  be  overburdened. As  criticism mounted,  the  then  RBI  Governor  D  Subbarao was  forced  to  stop  the  scheme  which  formally  came  to  an  end by  April  2011.

SBI,  however  refused  to  term  ‘FlexiPay  Home  Loan’  as  the  ‘teaser  loan’,  saying  it  is  not offering  any discount  in  interest  rates  or  offering  more  loan  to  value.

“In  FlexiPay,  there  is  no  step-up  interest  rate. The  loan  is  similar  to  a  regular  home  loan, except  for  the moratorium  on  principal  repayment,” said  Jayanthi  Lakshmi,  chief  general manager  (real estate  and  housing development).

“The  EMIs  will  be  stepped  up  during  the  subsequent  years”,  the  bank said.  “We  obtain  an authorization from the  borrower  to  raise  the  EMI  if  there  is  an  increase  in  interest  rates. This ensures  that  their  principal liability does  not  increase,”  said  Jayanthi  Lakshmi.

SBI  new  scheme  of   “FlexiPay  Home  Loan”,  aims  to  enhance  its  home finance  portfolio  by  attracting  NewGen  borrowers. It  would  benefit  those  individuals  whose  salary  does  not entitle  them  to  the  size of  loan they  are  seeking.

Ajay Verma

Ajay Verma, founder and writer of TheHousingWorld, a real estate and mortgage news website. He has over fifteen years of rich experience in the above mentioned industries.

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