Home loans free of bad asset concern

Home loans free of bad asset concern
19/06/2018 , by , in News/Views

Housing finance is proving to be stress reliever for banks, groaning under bad assets.

The growth in housing credit, an area where dud loans are much lower, is set to pick up to 17-19 per cent in the current fiscal up from a stable 16 per cent in the previous year. According to credit rating agency Icra, more people now have the capacity to buy homes. Besides, government initiatives such as the Pradhan Mantri Awas Yojana have given a boost to affordable housing.

Mortgage penetration touched the double-digit mark of 10 per cent as on March 31, 2018, an improvement of 50 basis points over the preceding year. The penetration is expected to go up another 300-500 basis points over the next five years.

At the same time, overall asset quality indicators for all housing finance companies (HFCs) remained stable with the percentage of gross NPAs at 1.1 per cent as on March 31, 2018 compared with 1.2 per cent on December 31, 2017.

However, the RBI had recently warned the level of NPAs for loans up to Rs two lakh has been high and is rising. It has asked banks to step up their screening and follow-up measures.

According to the agency’s estimates, the gearing level of housing finance companies, which is the ratio of debt to equity capital, is expected to remain at around 8.5-9 times over the medium term.

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