Tagged: NPA

NTH :: Affordable home-loans next threat to banks:Moody’s-ICRA report

PTI | Updated: Jan 9, 2018, 16:01 IST | Times of India


MUMBAI: Even as a lot of thrust is being given to the affordable housing segment, a report has flagged concerns about the growing delinquencies in this segment, which are expected to continue in 2018.

Competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment, a joint report by Moody’s and its domestic affiliate Icra said today.

“While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” Icra’s structured finances head Vibhor Mittal said.

In a note on asset backed securities (ABS) co-written with its parent Moody’s, the report said gross-nonperforming assets in the affordable housing segment have inched up to 1.8 per cent as of September 2017.

The average cum 90+ days past due level for affordable housing was nearly seven times the level observed for traditional housing loan pools, it said.

Going into the reasons for the higher stress in the low ticket size loans, Mittal said, “this would be driven by factors like intensifying competition– resulting in some easing in lending standards — and a higher share of lending to the self-employed segment.”

It can be noted that the Modi government is targeting to ensure that there is a house for all by 2022 and has provided a lot of incentives for the affordable housing segment, including making it as a priority sector lending for banks and huge interest subvention and direct cash subsidy.

However, housing loans continue to be seen as the best performing retail loan asset class in the country, demonstrating low and stable delinquencies over the years, in 2018, it said.

This is possible because of the underlying collateral, which is self-occupied residential property, absence of steep correction in property prices and moderate loan to value ratios, the report said.

Moody’s said the impact of demonetisation and the implementation of the goods and services tax (GST) will lead to higher delinquencies in ABS for loans against property (LAP) to small and medium enterprises.

“Introduction of a GST in July 2017 and demonetization have placed stress on the SME sector,” Icra’s assistant vice- president Dipanshu Rustagi said.

The report also said auto ABS-backed by commercial vehicles loans will remain stable on the back of healthy domestic economic growth.

Icra said the microlending segment is on a “road to resurgence” after the note-ban setback with an increase in repayment rates to 94 per cent in September from the low of 87 per cent seen during December 2016 during the peak of the note-ban move.



NTH :: Banks learn a hard lesson worth Rs 5,192 crore on education loans

The figures speak for themselves. As on July 21, 2015, the total exposure of all banks to education loans was Rs 64,900 crore, according to RBI data. On an average, banks face an 8% default on this portfolio – that is Rs 5,192 crore.
Manju AB | Wednesday, 16 September 2015 – 7:25am IST | Place: Mumbai | Agency: dna | From the print edition


Sluggish job creation in the country is seeing students turning out to be the largest loan defaulters. Students from the southern states of Kerala and Tamil Nadu are the ones who are giving bankers sleepless nights, with the latter leading the defaulters list.

The figures speak for themselves. As on July 21, 2015, the total exposure of all banks to education loans was Rs 64,900 crore, according to RBI data. On an average, banks face an 8% default on this portfolio – that is Rs 5,192 crore.

Public sector banks are the worst-hit, as they are mandated by the government to give collateral-free loans. Private banks do not extend education loans. Bankers say moves are afoot to take collateral from the two southern states.

For the largest bank, State Bank of India (SBI), the default rate is 5%. The SBI’s default rate for its home loans is less than 1%. Even in the other portfolios of the bank, the default rate is about 3-4%.

For Bank of Baroda, the default rate on student loan is as high as 8.2% on a portfolio of Rs 2,100 crore. Its overall retail loan default is much lower, at 2.4%, and the home loan defaults is 1.64%. The same rates are replicated at most banks, with the Union Bank of India reporting a default rate of 6.5% and Canara Bank 8%. State Bank of Travancore, which is headquartered in Thiruvananthapuram, is affected the most, with a default rate of 12%.

A senior SBI official said: “Repayment is better in cases where borrowers are settled abroad as they generally get good employment and are able to repay their dues. Also, such loans are backed by collateral security. Students are very mobile. They move away from their place of study and it becomes very difficult to trace them. So, now we are insisting on PAN/ Aadhar details of the borrower/ co-borrower. In addition, we are ensuing that the names of defaulters do appear in the CIBIL database.”

All public sector banks are mandated to run the Student Loan Scheme, based on the Model Education Loan Scheme of Indian Banks’ Association (IBA). Under this model, loans up to Rs 4.5 lakh are extended without any collateral security, with just a co-borrower around. For loans above Rs 4.5 lakh and up to Rs 7.5 lakh, banks seek third-party guarantee. For loans above Rs 7.5 lakh, students need to submit collateral security. Delinquency is highest in the bracket up to Rs 4.5 lakh

“Tamil Nadu leads the default list, followed by Kerala, Andhra Pradesh and Odisha. These states have management courses and students are unable to secure jobs that will take care of their EMIs,” a senior Bank of Baroda official said. The bank has not kept any limit on its education loans.

According to a Union Bank of India official, “About 35% of the bank’s Rs 3,200 crore portfolio is lent to the southern states, where the maximum defaults occur. Loan requests are the highest from these states and we do not refuse education loans.”

Source: http://goo.gl/a47Pbi