For bankers, small is not beautiful if their experience in small housing loans is any indication. Public sector banks have reported a gross non-performing asset (NPA) level of 12 per cent for small housing loans of up to Rs 2 lakh with some banks even reporting 40-50 per cent NPA levels in the March quarter of 2015-16. However, the NPAs in the overall housing loan segment have showed only a marginal increase from 1.3 per cent in 2014-15 to 1.4 per cent in Rs 2015-16.
Andhra Bank has reported that 51.9 per cent of its housing loans up to Rs 2 lakh have defaulted during January-March 2016. In the case of UCO Bank, 41.8 per cent of small housing loan borrowers have defaulted. For Syndicate Bank, the default level was 36.9 per cent, Indian Overseas Bank witnessed 30.8 per cent of small loans and Bank of Baroda 21 per cent, according to finance ministry data.
Defaults in the sub-Rs 2 lakh segment were close to 6 per cent five years ago.
“Home loan customers of up to Rs 2 lakh are from the low income group who often find it tough to repay the loans in the absence of a steady income. On the other hand, interest rates have not fallen much for existing borrowers,” said an official of a public sector bank. While the Reserve Bank has reduced repo rate by 150 basis points to 6.50 per cent since January 2014, banks have passed on only half of the benefits. NPAs in home loans between Rs 2 lakh and Rs 5 lakh were at 3.4 per cent during January-March 2016. However, small loans constitute a smaller portion of the housing loan portfolio of bank and housing finance companies. The average size of individual loans stood at Rs 25.3 lakh in the case of HDFC.
According to the finance ministry, a 30 per cent growth in priority housing loans was prescribed during the last meeting between the finance minister, other ministry officials and PSU bank for FY 2015-16. However, banks till March 2016 have showed just 6.2 per cent growth in this sub sector, which is down from 6.7 per cent of March 2014. The reluctance on the part of the banks to push up small home loans could be the high default levels, said a banking source.
The growth in overall housing loans at 18.8 per cent is better than that of the corresponding period of last year, the finance ministry data says. This has happened at a time when public sector banks reported a credit offtake of just four per cent for the fiscal 2015-16 with credit growth to large and medium sized industries falling in the wake of huge non-performing assets. Total outstanding housing loans of PSU banks surged to Rs 520,722 crore in March 2016 from Rs 440,961 crore in March 2015.
State Bank of India, the leader in the home loan segment, showed a 20 per cent growth in outstandings to Rs 190,552 crore, Punjab National Bank reported a 25 per cent growth to Rs 26,923 crore. Union Bank’s housing loans increased by 16 per cent to Rs 21,739 crore.