The Hindu Business Line : Banks plan to step up housing loans

THE Reserve Bank of India may be frowning at the real estate bubble that it has spotted, but banks across the country are in no mood to apply the brakes on lending to the sector. On the contrary, banks appear to be chalking out plans to substantially increase their exposure to the sector in the coming days.

Several leading public sector banks told Business Line that they were taking steps including acquiring necessary approvals from the board of directors to enhance their lending to the housing sector.

The move comes at a time when RBI in its mid-term review of the credit policy has expressed concern over the sharp rise in prices of houses. "Asset prices, especially housing prices, have registered a substantial increase. Asset price changes can have a powerful effect on investment and/or consumption through a financial accelerator effect and in this context, large swings in asset prices continues to pose a challenge for monetary policy," RBI has said.

It has also cautioned banks that such asset price changes could affect their credit quality. "Rising share of housing and real estate, in particular, has warranted precautionary policy action to ensure credit quality."

"I have taken board approval to step up housing loans to 20 per cent of my total lending from the present 15 per cent," the Chairman and Managing Director, Punjab National Bank, Mr S.C. Gupta, said. PNB has an asset size of Rs 68,868 crore.

Mr Gupta said that NPAs on housing were nominal. "The total real estate NPA is around 2.5 per cent, with NPAs on individual housing loan at 1.25 per cent. There are virtually no NPAs on hotel loans. We have sound internal policies on housing exposure," Mr Gupta said.

The CMD of Vijaya Bank, Mr M.S. Kapur, expressed similar views. "We will certainly increase our exposure to housing with appropriate checks and balances. Our total trade finance, including housing loans is 38 per cent of our loan portfolio (18 per cent of which is housing loans). We want to push it to 50 per cent with a major portion of the increase being for housing purposes."

Trade finance includes loans to small traders, SSI loans, car and commercial vehicle loans and loans to weaker sections.

Mr P.K. Gupta, CMD, United Bank of India (UBI), who is also heading the apex bank for the housing sector, the National Housing Bank, said UBI considers housing "one of the more attractive sectors within retail credit."

He said that compared to industry standards, UBI retail exposure including housing loans is comparatively low at 18 per cent of total credit that he would like to ramp up substantially. "Most banks are aiming for retail loans at 50-60 per cent of credit. We have sufficient room to step up retail loans including housing," Mr Gupta said.

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