| "The recent rise in interest rates has led to a slowdown in loan growth," said State Bank of India Chairman, OP Bhatt, on the sidelines of the Pravasi Bharatiya Divas. |
| The increase in property prices has also begun to pinch, resulting in prospective home buyers postponing their decisions. |
| "While rising interest rates have had an impact, the bigger impact has been that of real estate prices becoming very high," said Rajeev Sabharwal, senior general manager at ICICI Bank. |
| He said in "some markets", home loan growth had declined to around 25 per cent. According to the Reserve Bank of India, home loans had grown by over 54 per cent on June 30, 2006, from a year earlier to Rs 1,71,917 crore. |
| Retail loans, which grew by over 40.0 per cent in 2004-05 and again in 2005-06, have been the prime driver of credit growth in recent years. Sabharwal said interest rate increases could be mitigated by extending loan tenures slightly in certain cases but there was no way to counter a sharp rise in asset prices. |
| ICICI Bank's retail loan portfolio had grown by 64 per cent in 2005-06 with home loans accounting for 50 per cent. Sabharwal said, "ICICI Bank's (retail loans) will grow close to the market growth rate (in 2006-07)." |
| State Bank of India's Bhatt said the interest rate cycle had more or less peaked. He said there was slight pressure on liquidity but no shortage of credit for productive sectors because there were various instruments at banks' disposal to improve liquidity. |
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