Housing loans grow 20 pc to Rs 3.15 lakh cr last fiscal: RBI
The Reserve Bank of India has said that home loan disbursals rose by 20 percent to Rs 3.15 lakh crore in 2009-10 compared to the year-ago period, primarily helped by lower interest rate.
In its report ‘Trend and Progress of Banking in India 2009-10’, RBI said that while home advances rose, loans for other retail segments such as auto, consumer durables and personal purposes dropped in the last fiscal.
“The pick up in housing loan growth was partly on account of low interest rates that prevailed during most part of 2009-10 despite the fact that property prices, which had experienced a correction in 2008-09 immediately following the crisis, showed a spurt during 2009-10,” the report said.
The housing loans in the 2008-09 fiscal stood at Rs 2.63 lakh crore, which marked a growth of just 4.1 percent as against the 2007-08 financial year.
In 2009-10 fiscal, consumer durables’ loan fell 44.2 percent to Rs 3,032 crore while auto loans declined 6.6 percent to Rs 78,346 crore as compared to the year-ago period, the report said. Other personal loans decreased 3.5 percent to Rs 2.03 lakh crore last fiscal.
The credit card receivables also slipped during the last fiscal to Rs 21,565 crore from Rs 29,941 crore in 2008-09 financial year. “Given that most retail sectors are rate-sensitive, credit to these sectors in future would be impacted by the emerging interest rate environment,” the report said.
The apex bank is currently tightening the screws on housing loans to rein in spiralling inflation and stave off the possibility of realty bubble in the fast growing economy. In its quarterly monetary policy this month, RBI made the norms for housing loans more stringent to curb excessive borrowing, against the backdrop of rising real estate prices. Going by estimates, property prices in most metros have touched levels that were seen before the global financial meltdown in 2008-09.
Among the steps mandated by RBI is an increase in the risk weight of high-value loans, an increase in the funds to be kept aside by banks as a cushion in case of defaults on loans made at teaser rates and bringing down the ceiling limit on housing loans to 80 percent of the property value.
The RBI also asked banks to set aside a higher amount for controversial teaser home loans rates to act as a cushion in case of defaults. Teaser home loans are offered at low interest rates during the initial years.
India compares poorly with Asian peers in fin inclusion: RBI
India compares poorly with OECD as well as many of its Asian peer group countries with respect to financial inclusion, the Reserve Bank said on Monday.
Domestic banks’ performance in meeting their agricultural and weaker sections sub-targets was relatively weak in 2009-10, the apex bank said.
However, they were able to meet their overall priority sector target, it said.
A welcome development in the recent years has been a steady increase in the penetration of bank branches and ATMs, the RBI said in its Report on Trend and Progress of Banking in India 2009-10, released in Mumbai on Monday.
“More importantly, the increased penetration of both branches and ATMs could be seen across rural India,” the RBI said.
Micro-finance showed further growth in 2009-10, particularly under the MFI-linkage programme as compared to the SHG-Bank linkage programme, it said.
The report highlighted the near completion of computerisation and an increase in the extent of adoption of Core Banking Solution (CBS) in public sector banks in FY 10.
Banking sector needs to support the growth momentum in the economy while giving due attention to the asset quality and prudent provisioning to balance emerging returns and risks.
“Further, banks need to step up efforts towards financial inclusion using the instrument of scale-neutral technology as this would help in bringing the vast population into the ambit of formal finance and also boost future economic growth coupled with equity,” it said.
RBI concerned over Basel III implementation
The Reserve Bank has said the domestic banks will have to shore up their capital base once the Basel III norms kick in, even though there will be no immediate effect on them, given their already higher capital base and limited leveraging of balance sheets.
On the macroeconomic impact of the enhanced Basel II capital and liquidity norms, RBI, quoting the FSB-BCBS Macroeconomic Assessment Group report, the apex bank said if higher requirements were phased in over four years (as is being planned), each one percentage point rise in bank’s actual ratio of tangible common equity to risk-weighted assets (CAR) would lead to a 0.20 percent drop in GDP.
“This implies that the annual growth rate would be reduced by an average of 0.04 percentage points over a 4.5 year period, with a range of results around these point estimates. On the other hand, a 25 per cent rise in liquid asset holdings would affect output by less than half than associated with a one-percentage point increase in capital ratios.
The projected impacts arise mainly from banks passing on higher costs to borrowers resulting in a slowdown in investment,” RBI pointed out in its statutory Report on the Trend and Progress of Banking in 2009-10, released on Monday.
The central bank further explained that with a supervisory monitoring period up to end December 2012, the phased implementation would start from 1st January 2013.
Along with the global liquidity standards, these reforms which are expected to fully meet the core requirements of the global financial reform agenda will be presented to the forthcoming Seoul G-20 Summit this month.
On other hand, the RBI report pointed out that full implementation of the Basel III regulatory reform would subtract an annual average of about 0.6 percentage points from real GDP growth over the five year period 2011-15, and an average of about 0.3 percentage points from the growth path over the full ten year period, 2011-2020.
It noted that post-implementation, the Euro area will be hit the hardest while Japan will be the least affected, with the US somewhere in the middle depending on the significance of the banking system relative to the economy, the pattern of debt intermediation flows and the extent to which systems needs to adjust to meet the new requirements.