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K.R. Srivats

Govt to press for caution on fresh exposures

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New Delhi Feb. 4 Public sector banks' (PSBs) growing loan exposure to individuals through home loans, vehicle loans, consumer durable loans, credit cards and loans against shares has come under the Government's lens.

With personal segment advances of these banks doubling in a span of 30 months, the Finance Minister, Mr P. Chidambaram, is likely to sound a note of caution to the chief executives of PSBs when he meets them on Monday.

Indications are that the Finance Minister may make a case for some moderation and ask the PSBs to review their asset allocation in various segments of personal advances vis-à-vis associated risk.

Official sources said that review of personal segment advances of PSBs is on the agenda of the Finance Minister's meeting with Chief Executives of PSBs.

It was also pointed out that PSBs personal segment advances grew at a faster pace than gross advances during the 30- month period from April 2004 to September 2006.

Personal segment advances including home loans, consumer durable loans, vehicle loans and education loans increased from Rs 1,10,761 crore as on March 2004 to Rs 2,23,961 crore as on September 2006, reflecting a growth of 102 per cent.

On the other hand, gross advances of the PSBs for the period under review increased from Rs 6,20,575 crore as on March 2004 to Rs 11,23,033 as on September 2006 — a growth of 81 per cent only.

The share of personal segment advances as a percentage of gross advances increased from 17.85 per cent as on March 2004 to 19.94 per cent as on September 2006.

With bank credit continuing to grow at rapid pace for the third year in succession, the Reserve Bank of India had in its recent third quarter review of monetary policy stressed the need for measures to moderate credit growth.

This is even after accounting for the relatively low level of credit penetration in the country and the structural transformation of the country that is underway.

Home loans double

Housing loans portfolio of PSBs, which account for about 50 per cent of personal segment advances, recorded a 111 per cent growth from Rs 53,737 crore as on March 2004 to Rs 1,13,230 crore as on September 2006.

House prices in many cities have more than doubled over the last two years, thanks to demand outpacing supply and liberal financing regime available to the homebuyers.

As many as 8 PSBs including Dena Bank, United Bank of India, State Bank of Mysore, Allahabad Bank, Bank of India and Oriental Bank of Commerce (OBC) recorded over 150 per cent increase in home loans during the period under review.

While the housing loan portfolio of the nationalised banks grew from Rs 30,868 crore as on March 2004 to Rs 66,439 crore as on September 2006, the SBI Group's home loan exposure grew from Rs 22,869 crore to Rs 46,791 crore.

Education loans portfolio of PSBs grew 175 per cent from Rs 4,481 crore as on March 2004 to Rs 12,337 crore as on September 2006.

More Stories on : Public Sector Banks | Credit Market | Financial Policy | Housing Finance

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