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Affect of warning from the regulator on home loan portfolios


Affect of warning from the regulator on home loan portfolios

Last updated: June 15 2007
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  • Affect of warning from the regulator on home loan portfolios

    After a recent warning from the RBI, commercial banks have decided to go slow on the housing loan portfolio. In fact, they are working overnight to slow down their growth rates in the segment.

    According to industry experts, housing loan portfolio of most of the public sector banks were growing by about 35% to 40% year-on-year. Recently the Reserve Bank of India (RBI) has asked the banks to focus on productive sectors like infrastructure, small and medium enterprises (SMEs) and curtail the credit offtake to unproductive sectors like commercial real estate, credit card spends, second and third housing loans, clean loans and personal consumption loans. The idea is have a check on the bad debts.

    This has forced banks which have grown their home loan pertfolio significantly to restrict the advances to the sector.

    K Ramakrishnan, chairman and managing director of Andhra Bank said, "as such there are no problems with the credit offtake in the home loans. What has actually happened is that banks have suddenly started restricting their growth to 20% to 25% as against the 35% to 40% growth they had registered earlier. If a customer walks in for his or her first housing loan then banks extend credit. But if it is the second or third housing loan, then it is treated as a commercial deal and banks are hesitant to offer loan. The lull in the home loan segment is because the focus is slowly shifting to productive sectors from the unproductive sectors. At our bank, we will continue to lend to productive sectors but will go slow in the case of unproductive sectors".

    source: The Financial Express
    Last edited June 15 2007, 11:41 AM. Reason: edit
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