SBI says RBI should be regulator for all home loans

The State Bank of India, the country's largest lender, has suggested that the Reserve Bank of India should be the regulator for all home loans provided by banks as well as housing finance companies.

Currently, the RBI regulates home loans provided by commercial banks, while those provided by home finance companies like Housing Development & Finance Corp (HDFC) or LIC Housing Finance are regulated by the National Housing Bank.

"I see no justification for having a separate regulator for home loans. Perhaps the regulation objectives would be better served if RBI becomes the sole regulator for all loans, including home loans," SBI Chairman Pratip Chaudhuri said in Kolkata on Saturday.

Banks currently account for more than two-thirds of home loans disbursed in the country.

"A single regulator having the same rules for all players would help remove the regulatory arbitrage that existed between banks and HFCs," Chaudhuri said.

Chaudhuri also defended his bank's dual rate policy on home loans – called teaser rates – introduced some years ago, which the RBI had criticised.

"If a bank offers a slightly lower rate in the initial years and a higher rate in later years, it is called a teaser loan and they are required to make provision, but could similar rules not be applied for other players in the home loan market?" Chaudhuri said.

The SBI also urged the central bank to reduce the minimum tenure of deposits to three days from seven days to give customers more flexibility.

"The liquidity risk is not very different for a seven-day deposit and three day deposit; so the question is why make banks handicapped?" Chaudhuri asked.

"These are not issues that will lead to inflation or bring imbalances in financial stability, but induce flexibility to the depositor," he said. "Now we have shadow banking offering investors investment for even one day."