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Home loan banks portfolios slowing down
May 21, 2007: The Reserve Bank
of India (RBI) diktat to banks to go slow on home
loans coupled with rising interest rates has resulted
in home loan portfolios of large banks showing
signs of a slowdown.
Major banks including State Bank of India (SBI),
Union Bank of India (UBI), ICICI Bank, HDFC Bank
and Punjab National Bank (PNB) have witnessed
a substantial fall in the growth rates of their
home loan portfolio.
“There were five rate hikes in 2005-06
against none in the previous year, which is being
reflected in the banks’ home loan portfolios.
In fact, the banks were offering competitive rates
in the previous year to build a strong portfolio.
The recent rate hikes have made it difficult for
banks to offer low interest rates and are compelled
to pass on the burden to the customer,”
banking expert US Bhargava said.
Experts say during the last quarter of 2006-07,
some banks including PNB witnessed negative growth
rates on a quarter-on-quarter basis. There were
three interest rate hikes in the last two quarters
of 2006-07, which made home loans expensive for
customers, affecting banks’ home loan portfolio.
In contrast, 2005-06 was a good year for both
banks and real estate companies with no interest
rate hike.
While the growth rate in home loans for SBI has
dropped from 28.21% in 2005-06 to 18.17% in 2006-07,
for UBI, the drop has been from 30.22% to 11.31%
during the period. The country’s largest
private sector bank and one of the biggest player
in home loan segment, ICICI Bank too has witnessed
a drop from 45% to 38.49%. For HDFC Bank, the
fall has been from 38% to 24.75% during the period.
The only exception is Bank of Baroda that has
seen its home loan portfolio growth rate almost
double from 24.04% to 43.43% in 2005-06. These
are, however, industry estimates, and not confirmed
by individual banks.
“This is an industry-wide trend and not
particular to any bank. With the likelihood of
defaults rising, it is a positive sign for the
industry that the growth rates are slowing down
and not growing at the same fierce pace as the
previous year,” a senior executive at a
private bank said.
Source: The Economic Times
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