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Banks will have to be cautious when it comes to growing their commercial real estate (CRE) and home loan portfolios, according to credit rating agency CARE Ratings. In FY2014, banks loan growth in the CRE segment was higher, at 22.4 per cent (year-on-year) as against 11.9 per cent in the previous year.
In absolute terms, in FY2014, banks disbursed loans aggregating to ₹28,300 crore to the CRE segment against ₹13,400 crore in the year-ago period.
The credit rating agency said the higher growth rate in credit to commercial real estate would have to be dealt with caution given the vulnerability of this sector in terms of asset quality.
Home loans In its report on the credit profile of the banking system, CARE observed that home loans, the largest segment in the personal loans sector, with a share of almost 10 per cent in total credit, witnessed high growth in an environment when interest rates have increased.
“This means that, notwithstanding rising equated monthly instalments, households continued to take loans to buy homes which, combined with higher credit growth to commercial real estate, indicates a fair degree of optimism in this segment.
“However, with interest rates being high and unlikely to come down in the next six months (CARE’s expectation is of rates coming down only in Q4 of FY15 provided inflation falls to below acceptable levels) banks would have to be cautious here too,” said the report.
In FY2014, banks’ loan growth in the CRE segment was higher, at 18.4 per cent as against 15 per cent in the previous year.
MSMEs In absolute terms, in FY2014, banks disbursed home loans aggregating to ₹84,100 crore against ₹59,600 crore in the year-ago period.
The micro, small and medium enterprises witnessed higher growth in credit in FY14 as they were the ones which accessed the banking channels for funding.
CARE said this (MSME) would be an area to be monitored by banks as these units had also witnessed negative growth in both sales and net profit for the first nine months of the year
Bank loans to MSME saw a growth of 23.7 per cent against 20.2 per cent in the previous year. Loans to the medium enterprises were up 2 per cent against a 0.1 per cent de-growth in the previous year.
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