Public sector banks also see drop in defaults
Home loan takers have brought cheer to public sector banks this year.
The first six months’ figures show that total outstandings reached almost 96 per cent of 2011-12 figures and more than that in the entire 2010-11.
Most importantly, non-performing assets (NPAs) have declined in all home loan categories, at a time when overall NPAs are rising alarmingly.
This trend is evident from the figures compiled by the Finance Ministry for the review meeting on the performance of public sector banks, chaired by Finance Minister P. Chidambaram on November 15. A senior bank official said the increase in home loans could be attributed to two main factors: reduction in interest rate and in equated monthly instalments (EMI).
After the review meeting, the Finance Minister mentioned that auto loans had also registered a sharp offtake.
Normally, home loan data are collated under five categories: up to Rs 2 lakh, Rs 2-5 lakh, Rs 5-10 lakh, Rs 10-25 lakh and above Rs 25 lakh.
Among these categories, the maximum loan is given in the Rs 10-25 lakh category. However, in terms of NPAs, loans up to Rs 2 lakh contribute the maximum. Finance Ministry data show that NPAs have come down in all categories, but most prominently in loans up to Rs 2 lakh.
Bankers said that now there was more focus on personal contact with borrowers. “Bank managers have been asked to reach every borrower to see how loan outstandings can be settled. It can be done either through one-time settlement or extended tenure,” R.K. Dubey, Executive-Director, Central Bank of India, said.
Meanwhile, a three-pronged strategy has been proposed for boosting home loans. These include ensuring extended benefits to all eligible beneficiaries under the 1 per cent interest subvention scheme, for which Rs 400 crore has been provided. The Finance Ministry expects that the entire budgeted amount will be utilised as over Rs 200 crore has been distributed so far.
Another significant component of the strategy is the Credit Risk Guarantee Fund Trust, launched last month by Housing and Urban Poverty Alleviation Minister Ajay Maken. The fund provides guarantee up to 90 per cent of the amount in case of default on housing loans up to Rs 2 lakh and 85 per cent in defaults of Rs 2-5 lakh.