In India floating interest rates encompassing nearly 97% of housing loans, the RBI (Reserve Bank of India) appointed banking ombudsman has been receiving a number of complaints from borrowers on the mounting credit risks as a result of increasing interest rates.
The RBI, taking cognisance of the situation, is likely to instruct banks to not recover pre-payment charges on floating rate home loans and has asked the Indian Banks Association (IBA) to suggest measures that can be taken to address the issue.
According to Mr. Rajeshwar Rao, Chief General Manager, RBI and banking ombudsman New Delhi area “Only 2-3% of the loans are fixed rate loans today. Even though interest risk is managed by banks, the risk is ultimately forced on the customer in a rising interest rate scenario,” said on recently.
Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and thus banks only substitute interest rate risk with potential credit risk.
The RBI, taking cognisance of the situation, is likely to instruct banks to not recover pre-payment charges on floating rate home loans and has asked the Indian Banks Association (IBA) to suggest measures that can be taken to address the issue.
According to Mr. Rajeshwar Rao, Chief General Manager, RBI and banking ombudsman New Delhi area “Only 2-3% of the loans are fixed rate loans today. Even though interest risk is managed by banks, the risk is ultimately forced on the customer in a rising interest rate scenario,” said on recently.
Floating rate loans pass on the interest rate risk from banks which are much better placed to manage it to borrowers and thus banks only substitute interest rate risk with potential credit risk.
Hai
ReplyDeleteI would like to invest my money in the land, i have chooses more then two places, in that The village in the omr, Chennai is attracted me very much because of the cheap rate in luxury villa with excellent car park areas. would i invest now or should i wait another one more year for rise in interest ….?
Peter