Govt,banks assure realty sector funding to continue

“The real estate and the housing segments are important for the economy and,hence,banks will not stop lending (to them),” SBI chairman OP Bhatt said. What has happened is not a “system-wide issue” as only a few individuals have been arrested,he said. Allaying fears of home loan seekers and realty players,Financial Services secretary R Gopalan earlier said in Delhi that the government has not directed banks and financial institutions to cut down on their exposure to the sector.

The assurance from banks came even as realty stocks were battered for the third session in a row on the stock exchanges amidst fears that banks would cut their exposure to the sector and real estate prices are set for a fall.

Said Ramnath Pradeep,chairman and MD,Corporation Bank,“All the loans are secured as adequate security was available in the system. Hence there is no systemic impact due to the housing finance scam which was busted by the CBI. There was good demand for housing loan. We are not going to stop lending just because of one such incident.”

Top bankers had a review meeting with senior officials of the Reserve Bank of India where the loan scam,liquidity situation,actions taken after the credit policy,bank investments in mutual funds and exposure to microfinance companies.

“I can only say that there is no lack of procedure,no lack of regulation,no clamping down on any kind of borrower. Proper review will be done and appropriate people will be punished,” said HDFC Bank MD Aditya Puri. Bank of India chairman and MD Alok Misra said,“As I have already said,we have bifurcated the sourcing and the sanction. It means if marketing of loan is being undertaken by someone,then the sanctioning of the same loan will be looked after by someone else. And we have got several layers of sanctions,its processes,branch,the zonal office,the head office and finally at the board level. So one person cannot influence it. Our exposure to the commercial real estate sector was to the tune of Rs 3800 crore.”

Meanwhile,banks said they are not investing much in the mutual fund as the liquidity was tight. “The RBI asked the bankers if they wanted to have any kind of finetuning so as to strengthen banks’ investment policy in the MF sector. The idea is to address asset-liability mismatch (ALM),” said a banker who participated in the meeting.

The banks’ exposure to the MFI sector was Rs 20,000 crore as on date. “Yes,the problem was there with the MFI sector in Andhra Pradesh. But there was no case of default by MFI borrowers in the state. Though the recovery percentage of the MFIs has come down in the state,nevertheless there was no systemic risk involved,” he said.