(From left) ICC president Rajiv Mundhra, Pratip Chaudhuri and RBI executive director Deepak Mohanty in Calcutta on Saturday. Picture by Kishor Roy Chowdhury

Calcutta, May 18: The State Bank of India today urged the Reserve Bank of India to act as a uniform regulator for all lending agencies, particularly the housing finance companies against whom the bank is competing for retail customers in the home loan segment.

“I see no justification of having a separate regulator. Perhaps the regulatory objectives would be better served if the RBI itself were to become the sole regulator for all lenders, including home loans,” SBI chairman Pratip Chaudhuri today said at an interactive session on banking organised by the Indian Chamber of Commerce and Industry.

At present, housing finance companies such as HDFC, LIC Housing Finance, Housing and Urban Development Corporation (Hudco) and others are regulated by the National Housing Bank under the guidelines laid down in the National Housing Bank Act, 1987.

Market observers feel that even as interest rates charged by banks are very close to that of housing finance companies, banks have a disadvantage because of its higher cost of borrowing. Banks have to mandatorily deposit a certain amount of cash reserve with the RBI. This may have prompted Chaudhuri to seek a common regulator.

“The RBI has kept the CRR unchanged at 4 per cent and it creates a burden for banks as such deposits with the apex banker do not earn any interest,” a senior bank official told the Telegraph.

“Unlike banks, housing finance companies are not mandated to park part of their deposits with the RBI as cash reserves. That is why even though the RBI has lowered its policy rates, many banks are reluctant to reduce their lending rates,” he added.

Chaudhuri had on several occasions expressed his concerns about CRR and had even urged the regulator to abolish it. Further, with rising bad debts and higher provisioning, the net interest margins that depends upon the difference between lending and borrowing rates come under pressure.

But why should the RBI heed the bank’s plea for unified rules?

Chaudhuri said, “Banks currently have two-third of the home loan market (in the country).”

He pointed out that the RBI had raised objections to the SBI’s dual rates on housing loan (tagged as teaser loans) introduced a few years back as it could lead to a subprime crisis similar to that of the US once customers are unable to afford higher EMIs as rates normalise.

“If a bank offers a slightly lower rate in the initial years and higher rate in later years it is called a teaser loan and they are required to make provisions for it... but should similar rules not be applied for other players in the home loan market?” Chaudhuri asked.

The SBI chief added that he has asked the regulator to lower the minimum tenure of deposits to three days from seven days to offer more short-term liquidity to borrowers.

“Right now there are no daily investment instruments whereas we have a shadow banking sector offering investment options for one day,” Chaudhuri said. “The liquidity risk of a three-day deposit was not different from that of a seven-day deposit. But why make banks handicapped?”

Shady schemes

Chaudhuri said the RBI as well as Sebi should kick start public awareness campaigns for depositors on the risk of investing in shady deposit mobilising companies. The bank chief said the regulators should consider campaigns such as the Jago Grahak Jago or hallmark in gold so that when investors put in their money they are assured that such deposits are insured by the Deposit Insurance and Credit Guarantee Corporation.

Margin pressure

Chaudhuri said the SBI would like to review its return on equity in overseas business as margins had come under pressure.