In the past few years the Indian banks have seen a remarkable growth in their home loan portfolios. Credit offtake in the home loans has seen a 25% annual growth for the past four years. But risks always accompany growth. The intense competition has led to competitive interest rates and narrowing of margins. In their eagerness to capture market share, the banks have sometimes overlooked the creditworthiness of the customers. All this has led to a dramatic rise in the non-performing loans. Some of the experts have also said that the home loan bubble may burst. Here is a realty check on the banks' exposure to home loans.

Giving a policy update, Dr. Y V Reddy, Governor, Reserve Bank of India (RBI), said on April 7 that the year 2003-04 saw an incremental credit offtake of Rs. 1,19,964 cr. He also went on to say that the credit expansion has been led primarily by the housing and retail sectors. Bank credit to housing has increased by 33% over the past year. This is a clear sign that the housing sector and especially the home loan sector has been the major growth driver for banks. This has been a boon for banks at the time when the credit offtake from the manufacturing sector was stagnating.

But risks always accompany growth. The banks are reporting higher delinquency rates and Crisil has recently reported a dramatic increase in non-performing loans in the housing loan portfolios. Even the RBI, while acknowledging the growth in the home loan market has warned the banks against growing too fast. There is also talk in some corners that the home loan bubble may burst. Well here's a realty check on the home loan exposure of the banks and other institutions.

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