The Reserve Bank of India (RBI) flagged worsening asset quality in the housing-loan space, stating that the non-performing asset (NPA) ratio in this category of loans rose to 1.1% in 2016-17 from 0.9% in 2015-16.
Much of the deterioration in asset quality came from the up to Rs 2-lakh loan slab, where the NPA ratio rose 60 basis points (bps) to 10.4% between FY16 and FY17. The rise in stress was more severe in the case of housing finance companies (HFCs), which saw the NPA ratio in the up to `2-lakh loan segment jump 250 bps to 8.6% at the end of FY17. State-owned banks fared better, with the NPA ratio dropping 10 bps to 11.9% at the end of FY17.
In an article titled “Affordable housing in India”, released as part of its monthly bulletin for January 2017, the RBI observed that in response to policy efforts, affordable housing is currently driving home-loan growth in the country.
“While the total disbursement of housing loans by public sector banks (PSBs) as well as the housing finance companies (HFCs) witnessed a deceleration in 2016-17, there was significant growth for the lower slabs,” the RBI said.
Housing loans up to Rs 10 lakh grew 23.5% year-on-year (y-o-y) in FY17, against 12.6% in FY16. Growth in this segment was driven primarily by PSBs, which contributed 54% of the `42,990 crore disbursed in FY17.
While the number of beneficiaries for loan amounts up to Rs 10 lakh rose sharply in FY17, the number of beneficiaries for loans of above Rs 25 lakh actually fell marginally, the RBI noted. In the case of the former category, the number of beneficiaries increased over 43% to 13.32 lakh, while in the above Rs 25-lakh loan segment the number fell 0.5% to 8.59 lakh.
The central bank said that the government’s credit-linked subsidy scheme (CLSS) was found to be effective in making houses affordable for the economically weaker section (EWS) category. “With CLSS, housing in 21 cities became affordable for the EWS in comparison to only five cities without CLSS,” the RBI wrote, adding, “The impact of CLSS in making houses affordable for the LIG (lower income group) and MIG (middle income group) segments, however, is less significant.”