Borrowers default on home loans below Rs 2 lakh, RBI asks banks to tighten processes
Reserve Bank of India (RBI) is looking to tighten norms in the low-ticket affordable loan segment by increasing the loan to value (LTV) ratio and increasing the risk weight to address rising bad loans.
“After a careful analysis of the Housing Loans data, it has been observed that the level of NPAs (non-performing assets) for the ticket size of up to Rs 2 lakh has been high and is rising briskly. Banks need to strengthen their screening and follow up in respect of lending to this segment in particular,” RBI said in a statement.
The banking regulator said it is closely monitoring the sector and “will consider appropriate policy response such as a tightening of the LTV ratios and/or an increase in the risk weights, should the need arise”.
There are almost 100 housing finance companies, of which many are focusing on the low ticket size lending to self-employed customer segment.
Assets under management of housing finance companies grew 24 percent last fiscal aided by massive opportunities in affordable housing and slower credit growth by banks.
In a recent interview with Moneycontrol, Ashwini Hooda, deputy managing director, Indiabulls Housing Finance said, “The entry level segment has seen some jump in the delinquencies because this is the first time some financier is underwriting Rs 2 lakh loan. My sense is lenders will get more selective in lending to this segment. They must not fund those properties where titles are not clear, term planning sanctions are through, etc.”
Some of the housing financing companies focusing on the affordable housing segment have shown an above-average increase in delinquencies with gross NPA between 4 to 5 percent.
