Amid rate cut demands RBI governor advocates lower realty prices

SBI Chairman Arundhati Bhattacharya on Thursday requested RBI to re-introduce the “teaser” loans to meet the demand and set the economy on the path of recovery.

Rajan also said that builders should first bring down prices and clear the stock else easier home loans might keep realty rates high.

Bhattacharya said the SBI’s teaser loans were able to revive demand after the economic crisis in 2008.

However, SBI had withdrawn teaser loans after the regulator had raised concerns over it saying that it may result in higher defaults after the rate goes up in the later years.

Commenting on India’s growth prospects, the RBI governor said: “Hopefully, if the monsoon does not deteriorate and in fact, improves; sowing has been good, you may see rural demand coming back more strongly, and that would be a tremendous bonus to the economy”. For the fortnight ended 7 August, non-food credit grew 9.6%. “These (payment) banks will not as much compete as compliment the existing system, by traversing the last mile”.

The National Capital Region, the country’s largest property market, saw a pile-up of inventory in the January-March period that will take close to 78 months to clear at the current pace of sales, according to property consulting firm Liases Foras Real Estate Rating and Research Pvt.

“Across the globe because of weak demand we have seen significant efforts to depreciate one’s currency”, he said on Thursday.

At the same time, Rajan also appeared critical of banks for not passing on entire benefit of RBI’s 0.75 per cent rate cut so far in 2015, and said markets are better reflecting the lowering of the central bank’s policy rates than the lenders. “We do believe that there is pick-up”, Rajan said, while speaking at the second SBI Banking and Economics Conclave here.

In an interview with Mint in March 2011, then RBI deputy governor K.C.Chakrabarty called the product “riskier” for both customers as well as banks.

He also said that the RBI had also voiced concerns over the pitfalls of the cryptocurrency in the past as well. “That is RBI’s view and I doubt it will change it”, he added.

Small finance banks are similar to universal banks but would operate on a small scale.

Bhattacharya said it is difficult for banks to lend to a project which has already been declared an NPA. “Even the eligibility was like the regular loan”, She said, adding that this was one of the tipping points in the economy.

She said the moment an account is declared NPA, giving further money to it, and very often this is required for stressed assets, becomes almost impossible. “We will have to wait and watch the situation”.