[sbinews] RBI warns of rate war in Home Loans

  • From: sbistcbangalore@xxxxxxxx
  • To: sbinews@xxxxxxxxxxxxx
  • Date: Sat, 13 Dec 2003 06:54:43 +0500

RBI warns of rate war creating loan bubble

MUMBAI: Reserve Bank of India deputy governor Vepa Kamesam has cautioned banks 
against reckless disbusement of home loans, which could create a bubble in the 
face of a rate war and inadequate documentation. 

Grow fast but do not cut corners, he warned banks, while chairing a session on 
retail banking on the second day of the bank economists’ conference here on 

He said the system of ‘know your customer’ should not be confined to money 
laundering cases, but should also apply in case of retail loans, adding 
customers should not be selected casually. 

Housing loans account for as much as 70-80% of the retail loan portfolio for 
many banks, some of whom are charging interest rates as low as 5%.Although 
mortgages are perceived as a safe hedge by banks, there are tricky issues 

On several occasions, loans are given against an agreement based on a power of 
attorney, not a title deed. In Delhi alone, 25% of residential purchases are 
said to be on power of attorney. These are clean loans and cannot be 
Speaking on the occasion, BD Narang, chairman of the Delhi-based Oriental Bank 
of Commerce said that as against acceptable delinquencies of 0.5%, the real 
delinquencies are 1.5% of loans, while incremental NPAs are 3%. 

The NPA is as high as 40% for part of the housing loans to SMEs.In rural areas 
and smaller towns, home loans are extended against extension of agricultural 
land which cannot be used for mortgage purposes. 

Mailing list (sbinews@xxxxxxxxxxxxx) related information:

News/articles about SBI and Banking related matters published  in the print 
media, Internet etc will be circulated through this Mailing List. 

The messages in this list will help in improving awareness of SBI and its 
activities vis-a-vis the happenings in the Banking industry. This should be of 
help to all staff members of SBI, particularly those who are preparing for 
promotional written tests/interviews/group discussions. Subscription to this 
Mailing List is simple and FREE. Please check the procedure below. Please share 
this information with other colleagues/branches that could be interested in 
subscribing to this Mailing List. 

The messages circulated here should not be deemed to have the official 
endorsement of the SBI or any of its employees. The correct factual position 
may be ascertained from official sources. 

To join this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx 
with the word 'subscribe' without the quotes in the subject of the email 

To leave this mailing list, just send an email to sbinews-request@xxxxxxxxxxxxx 
with the word  'unsubscribe' without the quotes in the subject of the email 

Archives (old messages) are available for viewing at:
Click on the month-year at the lower left corner to view messages posted during 
that month. 

This is an announcements/newsletter type mailing list i.e. only the Moderator/s 
can post messages to the list. 

This mailing list is maintained by Sri. R.S.Pai, currently working as Chief 
Manager(IT-Internet Banking), SBI, Corporate Centre, Mumbai. 
Moderator: Smt. S. Vijaya, CM (Training), SBI, STC, Bangalore.
Visit http://rspai.tripod.com for some useful Banking, Reference and Utilities 

Other related posts:

  • » [sbinews] RBI warns of rate war in Home Loans