Post on 08-Apr-2018
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8/6/2019 Effect of teaser home loan on risk & increased NPA for banks
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Live ProjectLive Project
onon
Effect of teaser home loan on risk & increased
NPA for banks
By- Kshitiz Saxena
Dilip Kumar
Amit Singh
Gajendra Singh
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Group IntroductionGroup Introduction
yy Presented ByPresented By:
y Amit Singh:- Primary data collector
y Dilip Kumar:-Presentation
y Kshitiz Saxena:- M.I.S.
y Gajendra Singh:-Survey Questioner
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Effect ofTeaser Home Loan on risk & increased NPAforEffect ofTeaser Home Loan on risk & increased NPAfor
banksbanks
Content cover under this:
What Teaser Home loan means?
Benefit of Teaser Loan for borrower
Selection of loan by customer
Problem faced under floating rate by borrower
What NPA mean?
Type of NPA
Reasons for increased NPA for banks
Effect of teaser home loan on risk & increased NPA for banks RBIS view on teaser home loan
Treatment of teaser loan by commercial banks
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Activity which we have planed to complete this project:- Telephone call
Survey
News
Banks websites
Interaction with faculties
These allare help us to complete our project in following way:-
Telephone call help us to meet our queries in bank.
Through survey we came to know the different views of people about
loan. News, banks website , faculties timely help us when we feel any
problem relate to project.
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Teaser Home loan means:- Its a type of loan which carry attractive
interest rate & discount offers during the initial phase of the loan.
After specific time period, they relapse back to the then prevailing
rates.
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Reason for like Teaser Home Loan by customer:-
Rate are usually 2 or more per less.
Having dual rate schemes
Due to deckling in property price
So this all are the reason which attract borrowers to borrow such type
of loan from banks.
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Problemfaced by customer in teaser home loan:-
Under it banks charge highly attractive rate for an initial repayment
say 1 to 3 years.
EMIs under this would be calculated at 1.5-2 per less thanprevailing rates initially.
Interest rate go up after the initial period & leads to increase EMIs
for borrowers.
Higher EMIs become the burden for the borrowers at certain years.
Such situation may force borrowers to default on repayment.
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What NPAmeans?
NPA is define as an advance for which interest or repayment of principal
or both
remain outstanding for a period of more th
an two quarters. NPAact as a indicator showing the bankers credit risks & efficiency of
allocation of resources.
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Type ofNPA :-
RBI has issued guidelines for banks for classification of assets into four
categories:-
Standard assets Substandard assets
Doubtful assets
Loss assets
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The classification ofassets ofscheduled commercial bank:-
*(Source-Department of banking supervision, RBI) (Rs in Cr.)
Assets 2003 2004 2005 2006 2007
Standard
assets
131620 167076 216448 296020 382368
Substandard
assets
3703 3127 2213 2396 4378
Doubtful
assets
8512 6391 5578 4438 3923
Loss assets 1118 825 900 940 941
Total assets 13333 10343 8691 7774 9242
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Reason for increased NPAfor banks:-
The may be widely classified classified in two:-
(1) Over hang component(2)Incremental component
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Effect ofteaser home loan on risk & increased NPAfor banks
Teaser loans are offer a low fixed rate of interest in the first few years
after which the loan floats as per the lenders benchmarks rate. Its leads
to increase the EMI of borrowers & create a burden to repay their loan on
time. Finally borrower default in EMIs. As a result it create a risk for bank
in the way of NPA.
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RBI views on teaser loan
RBI has hiked interest rates six times since January; this has raised the
cost of funds for financial institutions. Also, with the apex bank raising
the provisioning norms for housing loans in its last policy review, banks
need to keep aside 2% of the loan value compared with 0.4% earlier.
These issues have made mortgage lending costlier for banks and teaser
loans may not be a sustainable option to offer
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ConclusionConclusion
y Teaser loan is a type of loan having low rate in initial phase & its risesafter that
y Current teaser loan schemes differ in the range of 0.25 to 0.30 per at
teaser rate .
y Higher EMIs become the burden for the borrowers at certain years
y NPA act as a indicator showing the bankers credit risks & efficiency of
allocation of resources.
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Our LearningOur Learning
y Effect of teaser home loan on borrowers.
y How NPA creates in banks.
y Know the banks different functions.
y Provision made by banks to treat NPA.
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