RBI curbs home loan lending by banks
Business Standard: This could well put a brake on the great Indian dream of buying a home. Reserve Bank of India (RBI) has classified home loan as an exposure to real estate sector in respect to banks giving the loan. With this it has put a cap on the frenzied growth of home loan sector for the banks. Real estate is one of the three sector which is classified as sensitive with respect to banks, other two are commodities and capital market.
This decision will hit most to the banks which have recently been very aggressive in home loan lending like ICICI Bank (Nyse: IBN). It is the number one player in this sector along with HDFC bank (Nyse: HDB). ICICI Bank alone disbursed Rs 25,740 crore of home loans in 2005-06, which took its outstanding home portfolio as of March 31, 2006 to over Rs 40,000 crore. The RBI has not recommended any cap for banks exposure to these sectors but left it to the respective bank boards to decide the limit on their own.
It now needs to be seen how much cap will these banks put and what effect it will have on their overall lending and growth. Housing was recently a big growth driver specially for these private banks with rising income people were ready to take home loans on EMI basis and this was proving to be a steady income for the banks.
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