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In a new announcement, Reserve Bank of India made it clear that bad loans or non-performing assets to the realty sector is a concern and something has to be done immediately to bring the situation under control. India’s premier lender pointed at the increase of such loans in the recent times.
Realty sector belongs to the category of “sensitive sectors” due to significant unpredictability of prices and assets, and money lent here is also at risk. In view of the present situation, this could be a prominent move by RBI. India is yet to achieve a total recovery from the economic problems that prevailed in the past, and wise lending has become mandatory. In the update, RBI clarified that Indian banking sector is trying to revive the financial crisis and succeeded to an extent, but depreciating asset quality should be effectively dealt with. This new move is also part of attempts towards achieving financial stability.
According to a latest report published in 2013, majority of the 16% increase in credit assigned to sensitive sectors has been towards real estate.
The increase in property prices in Tier I and Tier II cities has influenced the credit growth in these sectors, RBI further informed. Whereas, if you look at the overall non-performing asset percentage, there has been an increase of 3.6 %, citing the 2013 March data as source.
Continuing, RBI also conveyed information on the proposed strategies to control NPA lending to real estate. The lender is planning to primarily focus on improving work performance by debt recovery tribunals and all other organizations that help retrieve bad debts or the NPAs.
Yet another concern for the bank was presence of doubtful loans within NPAs. All in all, RBI seems to actively get involved in the task of reviving the Indian economy and more initiatives seem imminent.
Realty sector belongs to the category of “sensitive sectors” due to significant unpredictability of prices and assets, and money lent here is also at risk. In view of the present situation, this could be a prominent move by RBI. India is yet to achieve a total recovery from the economic problems that prevailed in the past, and wise lending has become mandatory. In the update, RBI clarified that Indian banking sector is trying to revive the financial crisis and succeeded to an extent, but depreciating asset quality should be effectively dealt with. This new move is also part of attempts towards achieving financial stability.
According to a latest report published in 2013, majority of the 16% increase in credit assigned to sensitive sectors has been towards real estate.
The increase in property prices in Tier I and Tier II cities has influenced the credit growth in these sectors, RBI further informed. Whereas, if you look at the overall non-performing asset percentage, there has been an increase of 3.6 %, citing the 2013 March data as source.
Continuing, RBI also conveyed information on the proposed strategies to control NPA lending to real estate. The lender is planning to primarily focus on improving work performance by debt recovery tribunals and all other organizations that help retrieve bad debts or the NPAs.
Yet another concern for the bank was presence of doubtful loans within NPAs. All in all, RBI seems to actively get involved in the task of reviving the Indian economy and more initiatives seem imminent.
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