Conservative banks warm up to home loans

Conservative public sector banks are planning to push home loans more aggressively and lift self-imposed restrictions following reduced incidence of housing loan frauds.

Bank of Baroda (BoB) has decided to permit all its 2,600 odd branches to disburse housing loans. About a year back, in big cities such as Mumbai, Delhi, Kolkatta, Chennai, Ahmedabad, Bangalore the bank had reduced the number of branches that could disburse home loans.

Union Bank of India, which had earlier alerted all its branch managers to lend cautiously, has this year given very high targets for home loans.

"We have told our branch managers to grow the home loans portfolio by over 40 per cent against 30 per cent last year. There are reduced incidence of frauds compared with 2003-04," said a Union Bank of India official.

A BoB official said the old decision (to restrict the number of branches disbursing home loans) has recently been reversed. Now all branches will give out home loans.

BoB aims to grow its retail loan book by an aggressive 60 per cent this fiscal to Rs 10,200 crore and housing would constitute more than 50 per cent of it.

The bank's housing loan portfolio stood at Rs 3,500 crore as on March 2005. The incidence of borrowers taking home loans with fake documents, availing of multiple home loans for the same property and for diversion of funds started in the latter half of 2002.

In 2002-03, home loan frauds peaked to as much as Rs 200 crore. But with banks tightening their systems and processes, the number of cases surfacing since the latter half of 2004-05 has drastically reduced, said a banker.

This, however, does not mean banks have thrown caution to the winds. Punjab National Bank, which had experienced maximum number of frauds in Gujarat and Maharashtra, is still following a very selective lending mechanism in these states.

"The number of housing frauds has reduced because we have learnt," said U S Bhargav, general manager, Punjab National Bank (PNB).

PNB like many other banks now insists that bank officials visit the site of the home being financed an even talk to builder at times.

In order to check the authenticity of borrowers' income statements, the bank contacts the employer or income-tax authorities. PNB is, however, more ambitious on its home loan targets this year.

"On a larger base, we are aiming at a 35-40 per cent growth in home loans," said Bhargav. Last year, the bank grew its home loans by 35 per cent.