India's largest lender SBI (State Bank of India) is seeing the sharpest growth in loans to the real estate sector nearly double the industry average and much higher than that of private and foreign banks. Many analysts caution that such a rapid growth in the real estate sector could lead to higher bad loans for SBI.
For the quarter ended September, 2011 SBI's Gross NPAs (Non Performing Assets) grew to 4.19% of total assets, from 3.35% a year earlier, the largest in the real estate industry.
According to RBI (Reserve Bank of India) data, SBI group's exposure to the real estate sector grew 43.4% in the fiscal year ended March to Rs. 1.7 trillion from Rs.1.17 trillion against the industry growth of 23.2%. Real estate loans now account for 17% of the group's total loans, up from 13.7% in the previous fiscal, .
Compared with this, real estate loans account for 13.2% of the loan book of other PSU banks. New generation private banks have a greater exposure to the real estate sec
tor 26%. But the pace of growth has been slower.
Mr. A.P.Verma, the SBI's chief credit risk officer said, '' The majority of the loans in its real estate portfolio are less risky home mortgages.RBI is concerned primarily with commercial real estate and not with residential mortgage. In our Bank, commercial real estate is only around 1.5% of total loans or nearly Rs. 15,000 crore in March, 2011. Hence this does not carry a concentration risk,“ said .
The commercial real estate portfolio of SBI fell to about Rs. 9,195 crore in September, 2011. The home loan portfolio, at Rs. 92,383 crore, is 12% of the total loan portfolio of Rs. 7.9 trillion.
Analysts said,' 'The sharp rise in SBI's overall real estate book to the lender's controversial special home loan scheme or teaser loans.
SBI added about around Rs. 36,000 crore in home loans till the teaser loan scheme was discontinued early this fiscal year (2011-12) in the face of stiff opposition from the banking reg ulato, RBI (Reserve Bank Of India).
Teaser loans offer cheap rates in the initial years. RBI asked SBI to set aside more money for such loans, saying that customers may not be able to cope with the in- creasing EMI burden in subsequent years and loan defaults may rise.
RBI has raised its key lending rate 13 times since March 2010 to tame persistently high inflation.
Many borrowers, who had drawn housing loans at a interest rate of 8-8.5% one year back, have now seen their repayment rates going up to 12-14% on account of suc- cessive rate hikes by banks.
Due to high lending rate many home buyers have postponed planned purchases..
Src: Liivemint
For the quarter ended September, 2011 SBI's Gross NPAs (Non Performing Assets) grew to 4.19% of total assets, from 3.35% a year earlier, the largest in the real estate industry.
According to RBI (Reserve Bank of India) data, SBI group's exposure to the real estate sector grew 43.4% in the fiscal year ended March to Rs. 1.7 trillion from Rs.1.17 trillion against the industry growth of 23.2%. Real estate loans now account for 17% of the group's total loans, up from 13.7% in the previous fiscal, .
Compared with this, real estate loans account for 13.2% of the loan book of other PSU banks. New generation private banks have a greater exposure to the real estate sec
tor 26%. But the pace of growth has been slower.
Mr. A.P.Verma, the SBI's chief credit risk officer said, '' The majority of the loans in its real estate portfolio are less risky home mortgages.RBI is concerned primarily with commercial real estate and not with residential mortgage. In our Bank, commercial real estate is only around 1.5% of total loans or nearly Rs. 15,000 crore in March, 2011. Hence this does not carry a concentration risk,“ said .
The commercial real estate portfolio of SBI fell to about Rs. 9,195 crore in September, 2011. The home loan portfolio, at Rs. 92,383 crore, is 12% of the total loan portfolio of Rs. 7.9 trillion.
Analysts said,' 'The sharp rise in SBI's overall real estate book to the lender's controversial special home loan scheme or teaser loans.
SBI added about around Rs. 36,000 crore in home loans till the teaser loan scheme was discontinued early this fiscal year (2011-12) in the face of stiff opposition from the banking reg ulato, RBI (Reserve Bank Of India).
Teaser loans offer cheap rates in the initial years. RBI asked SBI to set aside more money for such loans, saying that customers may not be able to cope with the in- creasing EMI burden in subsequent years and loan defaults may rise.
RBI has raised its key lending rate 13 times since March 2010 to tame persistently high inflation.
Many borrowers, who had drawn housing loans at a interest rate of 8-8.5% one year back, have now seen their repayment rates going up to 12-14% on account of suc- cessive rate hikes by banks.
Due to high lending rate many home buyers have postponed planned purchases..
Src: Liivemint
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