Reserve bank of India has suggested banks to offer the customers home loan for the repayment option for 30 years. This move is to save the customers from fluctuating rate of interest as well as save the burden of EMI, which will be low in 30 years period.
In this proposal there is a provision to reset the rate of interest in 7-10 years with the view of the base rate and not to violate the regulatory guidelines.
“The Indian financial system has G- secs (government securities) up to 30 years and 30- year bonds by banks. Banks could, therefore, make efforts to offer longer- tenor fixed rate loans, say up to 30 years, which would help reduce the EMIs of borrowers,” says the K K Vohra panel’s final report, presented today. It was appointed to study the feasibility of introducing more long- term fixed interest rate loan products.
The panel feels banks could have the option to fix a reasonable cap and floor ( 200 or 300 basis points) at the time of reset in relation to the interest rate originally charged to the borrower. The suggestion is made to protect both customers and banks from the risks arising out of adverse movements in interest rates.
Banks offered home loan at fixed rate up to 2000 but it lost the charm when floating rate of interest introduced as rate of interest fall heavily in 2000. So in reducing rate of interest on can easily calculate the emi as well as what he is paying means how much the interest amount and how much the principal.
Banks also seeking to offer fixed deposits tenure above 5 years with which the liquidity problem will also resolve.
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Keywords-home loan,home loan offer,home loan max tenure