Banks squeeze home loan overdraft accounts
Banks squeeze home loan overdraft accounts
Some borrowers park large amounts in their home loan overdraft account,when they run out of options for generating high returns.This prompted lenders to hold back on offering this product to new customers.Home loan overdraft facility allows borrower to use advance as a savings account & transfer surplus funds there,on this amount no interest is charged on home loan to an extent of extra money kept in account. Lenders lose out on interest income, & have to make provisions required for outstanding loans.
Some borrowers park large amounts in their home loan overdraft account , when they run out of options for generating high returns. This prompted lenders to hold back on offering this product to new customers.
The home loan overdraft facility allows the borrower to use the advance as a savings account and transfer surplus funds there, on this amount no interest is charged on the home loan to the extent of the extra money kept in the account. Lenders lose out on interest income, and have to make provisions required for outstanding loans.
Observed that middle-class borrowers would use these additional funds to prepay loans, but shrewd investors would avail of an overdraft facility and park surplus funds to invest somewhere else. Ref. : https://timesofindia.indiatimes.com/business/india-business/home-loan-overdraft-a/cs-squeeze-banks/articleshow/64819650.cms --- Jul'02,2018
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