RBI Asks Banks to Go Slow on Home Loans

June 15, 2007	(Be the first to rate this story!)  Loading ...
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The commercial banks will now be going at a slow pace on the housing loan portfolio. The move is the resultant of a recent warning from Reserve Bank of India (RBI). Housing loan portfolio of most public sectors was growing by about 35% to 40% each year, as per the data compiled by industry connoisseurs.

The RBI has recently asked the banks to cut their exposure to real estate companies, personal consumption loans, credit cards spends, and concentrate more on productive sectors such as infrastructure, small and medium enterprises (SMEs).

Following the order, the banks are required to restrict excessive lending to the sector.  Contrary to this, soaring interest rates on home loans has brought a sharp decrease in home loan borrowers for the past few months. Individuals interested in buying residential property are waiting for the interest rates to come down in near future.

A few banks are saying not to witness any downward trend in credit offtake in the home loans. The actual thing is that the banks have suddenly dropped on their growth rate to 20% to 25% as against the previous 35% to 40% growth.

For a first-time home buyer, the banks are ready to extend credit. But, if it is regarding the second and third housing loan then the application is seen as a commercial transaction and banks try to put themselves off from lending the loan.

Banks increasing focus on productive sectors is expected to bring the hush back in home loan sector.  Most banks have decided to go by the words of RBI to offer more loans to productive sectors but will opt for a snail pace in the case of unproductive sectors.

Undeniably, there is a slowdown in the housing loan sector which will be a temporary phenomenon. However, the situation is likely to improve in the next few months. Lending more to productive sectors and distinguishing Indian retail sector as a whole as unproductive will not going to serve as a feasible option in long run, says a banker.

News Published Under:   Home Loans |

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