Realty, equity loans double

The public sector banking industry nearly doubled its exposure to sensitive sectors like real estate and capital markets in the 2005-06 financial year, taking it to Rs 152,713 crore from Rs 80,988 crore in the previous year.

An overwhelming portion of the incremental lending "" almost 93 per cent "" went to the real estate sector.

The data covered 25 of 27 public sector banks whose balance sheets for the financial year were available.

"This is not surprising as the overall non-food credit of the banking system rose by 33 per cent last year. We may see a slowdown this year, with risk weight on loans to real estate going up," said a senior banker.

The total exposure of the 25 banks to the real estate sector zoomed to Rs 140,860 crore in 2005-06 from Rs 74,131 crore in 2004-05.

The banks' direct exposure to residential mortgages rose to Rs 85,995 crore from Rs 43,229 crore. Of this amount, Rs 50,460 crore (Rs 33,219 crore) was meant for individual housing loans up to Rs 15 lakh.

The lending to commercial real estate was up by 149 per cent to Rs 23,447 crore and the fund and non-fund based lending to National Housing Bank and housing finance companies rose to Rs 30,935 crore from Rs 17,211 crore.

On a relatively smaller base, the public sector banks stepped up their lending to capital market by 72.8 per cent to Rs 11,853 crore from Rs 6,857 crore in 2004-05.

A major portion of these loans, Rs 5,500 crore, was given for investment in equity shares.

Investment in units of equity-oriented mutual funds aggregated to Rs 3,005 crore (Rs 1,906 crore), while lending of secured and unsecured advances to stock brokers rose to Rs 2,886 crore against Rs 1,080 crore in 2004-05.

Direct exposure to the real estate sector includes housing and commercial real estate loans and indirect fund-based and non-fund-based exposure involves lending to National Housing Bank and housing finance companies.

Capital market exposure includes investment in equity shares, bonds and equity-oriented mutual funds and advances against shares to individuals and secured and unsecured advances to brokers.

The State Bank of India, which accounts for about one-fifth of the banking industry, doubled its exposure to the real estate sector last year, taking it to Rs 32,721 crore (Rs 16,551 crore).

The bank's direct exposure to residential mortgages increased 156 per cent to Rs 23,249 crore (Rs 9,085 crore); loans to fund and non-fund-based exposure rose to Rs 4,779 crore (Rs 3,865 crore); and exposure to the capital market increased to Rs 2,339 crore (Rs 1,691 crore).