MFIs turn key borrowers in ’10
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Jan. 4: Loans to the microfinance industry had been amongst the fastest growing segments for the Indian banking industry, till the recent crisis. Recently released data by the Reserve Bank of India (RBI) indicates that the total exposure of Indian banks to this sector stood at Rs 28,308 crore in November. This is 51 per cent higher than the corresponding figure a year earlier.
The growth in loans to MFIs was higher than that for all other sectors, with the exception of the hospitality industry. The figure could have been even higher but for the string of controversies that has surrounded the sector in the past few weeks.
Overall however, the total exposure to this sector adds up to 0.8 per cent of the oustanding loans given by the Indian banking industry, which indicates that there is little risk to the banking system on the whole.
Meanwhile, home buyers seem to be keeping away from the markets — not surprising given the jumps in property prices and increase in home loan rates. The total value of home loans has grown by just over 12 per cent from November 2009 to November 2010. While retail borrowers are clearly unhappy with rising interest rates, industries are not put off as overall growth in bank loans was a healthy 22 per cent.
The confidence of banks is also evident from the two rate hikes in lending rates — both in December. The second hike, which started with ICICI Bank, HDFC Bank and SBI on Friday, is being followed by other lenders as well. Banks have also been raising deposit rates as there is a shortage of cash, or liquidity as bankers call it.
Growth in deposits has been slower than growth in new loans, forcing banks to raise deposit rates as well, notes brokerage house Edelweiss. This is one factor that could bring down their margins in the coming months, the brokerage says. Bank stocks were amongst the big losers in an otherwise listless day on the stock markets.
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