Care warns of rising bank credit to realty, MSME sectors

Stating that industrial slowdown has forced banks to lend to riskier sectors like realty and small businesses, Care Ratings today called for a closer monitoring of such loans to avoid problems in the future.
"Credit growth in FY14 has been directed more towards the non-industry segment indicating both low growth as well as an element of diversification by banks given the state of industry," it said.
As a note of caution, the report added the exposure to property-related loans has gone up, "Which should be monitored by banks given the sensitive nature of this sector."
It said housing loans increased faster than the systemic growth rate of 14 per cent, at 18.4 percent, while the same for commercial real estate was up 22.4 percent.

Additionally, the report said the higher loan growth to MSMEs is also a matter of concern.
"The higher growth in credit to MSMEs once again highlights the vulnerability of these loans at a time when the industry has not been faring well for the second successive year," it said.
Loans to MSMEs as a category grew 23.7 percent during the bygone fiscal, it added.
Care noted that at 13.5 percent, agriculture and allied activities have also achieved a better performance.