High home loan NPAs in public sector banks under lens
To grow their secured credit portfolio, Banks usually believe housing loans the best bet. Whereas that is frequently the case, some public sector banks have reported higher level of non-performing assets (NPAs) in their housing loan book.
At six public sector banks, the finance ministry has showed concern over high home loan NPAs counting the Central Bank of India, Syndicate Bank, UCO Bank and Indian Overseas Bank.
These banks have been asked by the ministry’s financial services department to do detailed survey of their bad loans and work out a plan to reduce slippages as informed by a senior executive.
The deterioration in asset quality in housing is primarily due to the nonexistence of proper due-diligence, frauds and responsibility and issues involving title deeds in earlier loans, as per the bank executives.
In recent years Credit flow to the housing sector has witnessed vigorous growth. The housing loan book of state-owned banks rose 18.87 per cent to Rs 3.54 lakh crore at the end of December 2013 from nearly Rs 3 lakh crore a year ago. The boost is even better in the main concern sector category, according to government data.
Housing NPAs (in percentage terms) for PSBs has also come down on the whole. From 2.11 per cent in December 2012 to 1.81 per cent in December 2013, the Gross NPAs has declined. On the other hand, the overall level (covering the entire credit portfolio and not just housing) of stressed loans (gross NPAs plus standard restructured assets) went up from 11.6 per cent (in December 2012) to 12.6 per cent in December 2013.
The banks have been asked to pay special consideration to reduce NPAs in housing as it has implication for overall credit growth, by the ministry.
The steps that the bank will take to stem NPAs in housing are securing appropriate due diligence of proposals, such as physical inspections and increased observation.
Finance Minister P Chidambaram
On March 5, Finance Minister P Chidambaram had a meeting with the chief executives of public sector banks where he discussed steps (to reduce home loan NPAs).
The recommendations inculcate growing the responsibility of branch managers, particularly by making it mandatory for them to visit construction sites before sanctioning housing loans.
Before clearing loans PSBs must check encumbrance and title deeds. This can be easily done in rural and semi-urban areas where there should be no case for non-performance.
Banks have also been asked by the ministry to try and fetch as many properties as possible under the Central Registry of Securitisation Asset Recon-struction and Security Interest of India (CERSAI).The government has created the agency to keep the records of all mortgages deals.
The potential was with CERSAI to lessen problems faced by banks due to numerous mortgages. All transactions of housing loans should be linked to CERSAI by banks. To incorporate all titles CERSAI needs to work out ways and means under this net.
Source: Business Standard
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