Loan quality in Indian banks deteriorated: Bhatt

There has been a steady deterioration in asset quality of banks in the last two years on account of heavy stress in credit card and personal loan product segments, a top banking industry official said today.

"In the last two years, there has been a sharp deterioration in the asset quality (of lenders) because of stress in products like credit cards and personal loans which is a challenge as we go forward," State Bank of India Chairman O P Bhatt said at a banking conference here.

Bhatt said the losses accruing out of "alleged mis-selling of derivatives" or the selling of inappropriate products also needs to be checked.

There has been a huge fluctuation in the liquidity situation in recent times, which he described as "like a yo-yo" and which is a challenge to the banking world.

Bhatt, who is also the Chairman of IBA, said he sees a huge potential for growth across sectors fuelled by aspirational youth in coming times but added Indian banks will have to focus on various factors including hiring the right staff and developing leaders.

A trillion US dollars will be required to develop the infrastructure in urban India alone, Bhatt said, adding Planning Commission Deputy Chairman Montek Singh Ahluwalia and himself had a meeting to discuss the possibilities of creating an infrastructure fund.

Home loan is the highest growing segment within lending products and Bhatt said he expects the home loans portfolio to end at over $1 trillion in a decade's time.