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Real Estate bad egg in SBI's loan basket
Friday, April 27, 2007
Bad loans in India are beginning to increase, with the highest rise occurring in the real estate sector, State Bank of India's chairman said on Friday.
Bad loans were expected to spill into other sectors as well, as inflation was not moderating and infrastructure bottlenecks continued, Chairman O.P. Bhatt said.
The incidence of bad home loans was about 3-4 per cent, or about 0.5 per cent higher than earlier, he said, without specifying the time period.
"At the moment there is no cause for concern, but there is definitely a cause to think, plan and act," he said. "Whenever economic cycles turn one way or the other, there may be a lag effect ... there can be consequences," he said. "It is prudent to take action."
Inflation is running just above 6 percent, but analysts expect it to dip below 6 percent in coming weeks. The central bank, in its policy review on Tuesday, cut its medium-term inflation goal to 4.0-4.5 per cent from 5 per cent.
The country's top lender sees loan growth of 25 per cent in the fiscal year to March 2008, compared to about 28 per cent the previous year, Bhatt said.
The bank's deposits were expected to rise by 20 per cent in the current fiscal year compared to a 16-17 per cent expansion in the previous year, he said.
India's central bank on Tuesday left its main lending rate steady at 7.75 per cent, after jacking it up five times in less than a year to check inflation.
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