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The rush for retail credit hasn’t brought much cheer to banks in terms of home loan growth rate. Year till date (April 2012-January 2013) data from the Reserve Bank of India show growth in home loans is close to flat.
During the period, home loans grew by 10.4 per cent, compared to 10.5 per cent in the similar period last year.
Banks, which are expanding their home loan book, are aggressively taking over loans of other banks by offering lower interest rates and securitisation. Even for the State Bank of India (SBI), which has the best home loan rates in the country, home loan growth was 14.28 per cent as of December quarter. “Of these, 15 per cent is takeover from the other banks,” a senior SBI official said, adding this brings the net home loan growth to about 12 per cent, a little higher than the sector growth.
The shift has happened in favour of SBI since there is no pre-payment penalty on home loans now. An IDBI Bank official admitted many customers have moved their loans to banks that are offering lower rates (especially SBI) due to cost advantage, impacting the pace of expanding loan growth on an aggregate basis.
Even year-on-year growth in home loans is lower than last year. Such loans grew 12.3 per cent, compared to 13.3 per cent last year. Growth was even stronger at 15.1 per cent a year before that even though the rates were high.
Vibha Batra, co-head, financial sector rating at Icra, said the movement of existing home loan borrowers from one bank to another was happening at a time when the overall growth for the industry was flat. A sharp rise in house prices and high inflation eating into purchasing power have hit the demand for dwelling units.
The overall demand for credit is also subdued this year, according to RBI data. Credit grew 8.4 per cent year till date, compared to 10.5 per cent the same period last year.
Another commercial bank official said, “The focus on retail growth is continuing. However, growth would be seen only next year as bias on interest rate is expected to be on the lower side and buyers have deferred their purchases due to this.”
An analyst with a rating agency said, “The focus is on retail credit, as there is no demand from corporates. But, whether it will succeed would actually be seen only in the next few months.”
Most public sector banks are offering home loans up to Rs 75 lakh at the base rate, which stands at 10.25 per cent for most of the lenders. SBI offers home loans up to Rs 30 lakh with 25 basis points spread on base rate making the effective rate of interest stand at 9.95 per cent, which is best in the industry.
