Home loans jump 54% in Apr-June

Mumbai, Aug 30 | Updated: Aug 31 2006, 05:30am hrs
A sharp 54% jump in housing loans helped retail lending grow 47% in the first quarter of the current fiscal, according to the RBI annual report released on Wednesday. The spike in retail lending comes despite a 200 basis point hike in interest rates in the last one year.

Loans to commercial real estate doubled in the first three months. The year-on-year growth in credit to industry and agriculture was 27% and 37%, respectively, at end-June 2006, the annual report said.

Maintaining a growth target of 8% for 2006-07, the RBI said the countrys economy faced a persistent threat of faster inflation, reined in by a series of interest rate increases, because of industrial expansion and higher oil prices. There are continuing signs of demand pressures that could exert upward pressure on prices when associated with supply shocks, such as from oil, it said.

These pressures have the potential for impacting stability and inflation expectations. Growth prospects are, however, subject to a number of downside risks. The risks emanating from the global economy are potential escalation and volatility in international crude oil prices, the report said.

The pass-through of higher oil prices has not been full, and headline inflation in a way understates the problem, the central bank said. Headline inflation may be understated till that component is fully passed through, it added.

The RBI said it would gradually open up the capital account, nearly a month after the Tarapore Committee submitted its report. In regard to the foreign exchange market, the calibrated liberalisation of capital account transactions will be continued, it said.

The banking industrys incremental lending to non-banking finance companies during 2005-06 has also expanded by 300% to Rs 8,458 crore from Rs 2,501 crore during 2005-06.