The Hindu Business Line : SBI expects rise in home loan defaults due to higher EMIs

Mumbai, June 28 State Bank of India expects a marginal rise in default in home loans due to increase in equated monthly instalments (EMIs), Mr O.P. Bhatt, Chairman, hinted today.

The bank’s gross NPAs in the home loan segment currently hover around 3.76 per cent.

Speaking to newspersons, Mr Bhatt said that the bank has already seen a slowdown in home loans due to high interest rates.

“With rising interest rates, banks as of now have not increased their EMIs but are now left with no option but to do so. This may impact the repayment of loans and lead to a slight rise in NPAs,” said Mr Yogesh Agarwal, Managing Director.

In the last one year, interest rates have gone up by almost two percentage points.

On revision of interest rates, Mr Agarwal said that as of now there would not be any change.

The bank is awaiting the Reserve Bank of India’s quarterly review of credit policy and would decide on its rates accordingly.

Echoing similar views, Mr Bhatt said that interest rates have virtually peaked and if at all there was any hike in the near future, it could not be more than 25 basis points.

“Interest rates have stabilised at higher level and our stance is that it may increase NPAs.”

SBI plans to go in for a stake sale by December.

“We are waiting for the SBI Act to be amended, which makes it possible to bring down Government holding from 59.73 per cent to around 51 per cent. This will give the bank the option to go for a preference issue or a follow-on public issue,” said Mr Bhatt.

The bank hopes to raise around Rs 50,000 crore in the next three years, of which Rs 15,000 crore will be raised this fiscal.

It requires Rs 5,000 crore for complying with Basel-II norms.

SBI’s capital adequacy ratio currently stands at 12.34 per cent, of which tier-I capital is 8.01 per cent.

Mr Bhatt also said that the bank plans to increase market share by around 0.25 per cent every quarter.

On its inorganic growth plans, he said: “We have no plans as of now to acquire any bank. “As far as our associate banks are concerned, the bank will look at IPOs, follow-on public issues as well as mergers.”

SBI is also eyeing new business areas and revamping its existing models to capture a larger share of the market.

More Stories on : Housing Finance | Non-Performing Assets | State Bank of India

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