Housing loan customers may have to repay part of their borrowings or suffer very high EMIs, as there is a scurry among banks to avoid bad debts following successive interest rate hikes in the last six months.
Private sector lenders like ICICI Bank and HDFC, who were very aggressive in the home loan market in the low interest rate regime two years ago, are banking on tools such as part repayment of loan or increased EMIs so that borrowers meet their liabilities before they retire, an analyst said.
"So far, we are not affected by this syndrome as in case of public sector banks the rise in home loan rate is not as steep as in the private sector," Punjab National Bank Chief General Manager U S Bhargava said.
The bank has managed to absorb the effect by increasing the tenure, which in most of the cases are limited to the active service age. However, those in their late 30s or 40s will face pressure to repay part of the loan in advance.
Private sector banks, wherein the rise is as high as up to 4 per cent in the last two years, are finding in difficult to manage it and in some cases have resorted to asking debtors for prepayment of some part of the loan or agreed to increased EMIs, a senior official with a private bank said.
State Bank of India has already decided it will hike equated monthly instalments, and is even bracing for an increase in bad debts.
Generally borrowers take loan for 15-20 years. A further increase in the tenure will mean that borrowers in their late thirties would have to pay monthly instalments for a few years beyond the retirement age.
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