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C O N T E N T S Down
but not out A
vote for the future Making
the elephant dance Round
Table Dial
‘R’ for restraint Overcoming
obstacles Database |
[page 2] The latter was introduced by the Reserve Bank of India where commercial real estate exposure now also includes loans given to land and developers for construction, corporates for their real estate requirements and individuals, firms and corporates for non-residential premises.
Though the credit growth rate to sensitive sectors came down by half, the incremental credit growth continued to be over Rs 100,000 crore. That is, the banks’ lending to sensitive sectors rose by Rs 116,596 crore in 2006-07 and Rs 117,390 crore in 2005-06. The real estate sector attracted the maximum lending, almost 92.5 per cent of the overall advances.
A Business Standard Research Bureau’s study on 75 listed commercial banks reveals that the private sector banks were most aggressive with a 51.1 percent growth in lending to the sensitive sectors, followed by PSBs at 38.7 per cent and foreign banks at 31.4 per cent. The banking sector’s overall lending to sensitive sectors accounted for 20 per cent of their total advances, up from 18.52 per cent share in 2005-06. However, this growth did not come without any risks. The main reasons for this are the rise in the property prices and interest rates. As a result, the cost on borrowing rose to 34.6 per cent, as compared with 28.3 per cent in interest income. This is because banks borrowed through high-cost term deposits to keep up the retail push. The CASA (which is a ratio of current account and savings account over total deposit) showed a decline from 38 per cent last year to 36 per cent in 2006-07, clearly showing the higher cost of borrowing. As far as the overall lending to the sensitive sectors goes, the PSBs topped the list with 58.75 per cent, private banks 32 per cent and foreign banks 9.25 per cent. The banking sector’s lending to sensitive sectors now accounts for 20 per cent of their total advances, up from 18.52 per cent share in 2005-06. No wonder, the net non performing assets (NPAs) are slowly beginning to creep up. They increased by almost 10 per cent in 2006-07 for the entire sector. The private sector banks’ NPAs rose by a hefty 41 per cent, foreign banks, by 13.5 per cent and the PSBs, by 3.82 per cent. During the first half of the current year (2007-08), there has been a further increase in the gross NPAs (2.29 per cent) while net NPAs have sharply increased by over 10 per cent. Clearly, these are signs that the sector needs to tighten its belt a little bit more on the credit front.• Business Standard • December 2007 |
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