PSBs' small troubles

Now retail segment faces asset quality pressure

Some public sector banks (PSBs) are increasingly facing stress on their home loan portfolios, with Punjab & Sind Bank, UCO Bank and Syndicate Bank's non-performing assets at about 5 per cent, according to data compiled by the finance ministry.

The Reserve Bank of India (RBI) recently raised concern over banks going on an overdrive to push retail advances such as housing and auto loans, as it felt the absorption capacity of the consumer could be limited. At a time when credit demand remains sluggish, banks are pushing retail credit for revenue growth.

"Many banks have been crowding the retail space, trying to capitalise on demand for housing, two-and four-wheelers, white goods and so on. This, however, raises concern on the credit absorption level in the sector," S S Mundra, deputy governor, Reserve Bank of India, said in an investors' summit earlier this month. He also cautioned banks to stand guard against formation of asset bubbles.

Home loans grew 14.8 per cent for the year to September 19, 2014, compared with 20 per cent during the year-ago period.

The other area of concern for Reserve Bank of India, is the educational loan segment, which is also seeing rising delinquencies. During an interaction with Institute of Rural Management, Anand, students earlier this week, RBI Governor Raghuram Rajan said there was a need to take a closer look at education loans. "NPAs in education loans are also increasing. We need to look whether is it because people are not getting jobs or incentives to repay are getting low," he said.

Latest data released by the finance ministry showed growth in education loan had come down from a high of 40 per cent in 2009-10 to nine per cent in 2013-14.