New Delhi: Banks will now have to change their attitude towards the fixed rate home loan applications. Banks used to have the tendency of rejecting fixed rate home loan applications. Now, the RBI has intervened and is going to check this practice by banks.

This will benefit the customers who do not want to risk the loan rates on volatility of interest rates in the future. Apart from the home loan, the RBI has also urged banks to take proper steps towards giving fixed rate on other loans as well. 

The RBI has formed a committee to suggest ways for promoting loans on fixed rates. The move is expected to benefit customers and as well as banks. Banks will be able to calculate risks on different loans. This can also reduce the risk of NPA for banks as they will be having prior knowledge of future liabilities.

It is noted that banks have virtually stopped giving loans on fixed rates since 2006. At present, fixed rate on entire tenure of loan does not get approval from almost all banks in India. Few banks offer loan on fixed rates but they quote very high interest rates which the customers fail to accept. Few year back, teaser rate loans was started by banks. Under which fixed interest rate is offered for initial years of loan and after that it gets converted into floating rate afterwards. Customers faced problems in paying EMIs as the rates jumped significantly almost from 8 percent to 12 percent.  

According to CFO of Balwant Jain, with the announcement from RBI, demand for fixed interest loans will get spike. At first, fixed rate home loans were stopped by banks and afterwards fixed rate auto loans were also discontinued by the banks. In the recent years, for the tenure of more than 3 years, auto loans are also given on floating rates. Customer faces difficulty in assessing future liabilities under floating rate loans.