Department of Banking Supervision/बैंक िं ग पर्यवेक्षण कवभाग

Central Office/ ें द्रीर् ार्ाय लर्

Analytics Division/ कवश्लेकि ी प्रभाग

Japan Credit Rating Agency Meeting

Inputs on the captioned subject are as under:

7. High housing loan growth

Bank-group wise advances outstanding to Housing Loans sector are tabulated below:
Bank Retail Loans - Housing Loans - Advances Outstanding (Rs crore)
Group 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 30-Jun-18
PSBs 4,29,226 5,10,531 5,70,446 7,02,375 7,01,556
PvtSBs 1,85,964 2,23,428 2,59,285 2,97,689 3,24,225
FBs 28,063 28,511 23,734 21,235 20,734
SCBs 6,43,253 7,62,470 8,53,912 10,22,962 10,48,166

Bank-group wise growth in Housing Loans is tabulated below:

Growth in Housing Loans (%)
Bank Group
FY16 FY17 FY18 Q1FY19
PSBs 18.94 11.74 23.13 -0.12
PvtSBs 20.15 16.05 14.81 8.91
FBs 1.60 -16.76 -10.53 -2.36
SCBs 18.53 11.99 19.80 2.46

It is observed that for both PSBs and PvtSBs, the growth in Housing Loans has remained
high in the recent years.

There are a number of reasons for high growth in Housing Loans:

 Growing affordability for the first-time home buyers, supported by government
incentives like the PM's Awas Yojana are expected to result in a rise in primary
home purchases, especially in the affordable housing segment.
 Increase in income levels resulting in higher number of individuals buying real
estate properties. With access to cheaper bank credit increasing, this has resulted
in high loan growth.
 Japan Credit Rating Agency Meeting

Bank-group wise GNPA ratio for Housing Loans is tabulated below:

Bank Retail Loans - Housing Loans - GNPA Ratio (%)
Group 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 30-Jun-18
PSBs 1.14 1.31 1.47 1.72 1.93
PvtSBs 0.63 0.63 0.70 0.99 0.95
FBs 1.93 1.79 3.18 3.07 3.15
SCBs 1.03 1.13 1.28 1.54 1.66

It is observed that while the growth in Housing Loans has been high, the asset quality has
been relatively stable and GNPA ratio for the sector is much below the overall GNPA ratio
for the banking industry.

Bank-group wise asset quality ratios are tabulated below:

Bank Group Mar-17 (%) Mar-18 (%) Jun-18 (%) Change (bps)
PSBs 11.66 14.58 14.64 6
GNPA
ratio

PvtSBs 4.05 4.62 4.48 -14

FBs 3.96 3.80 3.52 -28
All Banks 9.31 11.21 11.02 -19
RSA ratio

PSBs 2.87 0.77 0.66 -11

PvtSBs 1.11 0.45 0.39 -6
FBs 0.48 0.06 0.05 -1
All Banks 2.30 0.65 0.55 -10
Adv ratio

PSBs 14.53 15.36 15.30 -6

Stressed

PvtSBs 5.16 5.07 4.88 -19

FBs 4.45 3.87 3.57 -30
All Banks 11.61 11.85 11.57 -28
PSBs 6.86 7.97 7.70 -27
NNPA
ratio

PvtSBs 2.15 2.39 2.15 -24

FBs 0.64 0.44 0.38 -6
All Banks 5.31 5.96 5.60 -36

Comparison between system level GNPA ratio for Housing Loans and overall GNPA ratio
is given below:

31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 30-Jun-18

Retail Loans - Housing Loans - GNPA Ratio
Housing Loans 1.03 1.13 1.28 1.54 1.66
Overall 4.62 7.79 9.58 11.46 11.19

2|Page Analytics Division, DBS, CO

 Japan Credit Rating Agency Meeting

Even in cases of delinquency, to ensure sufficient recovery, RBI has mandated

conservative Loan to Value (LTV) ratios, given below:

RBI maintains All India Housing Price Index (HPI) and the latest available HPI till Q3FY18
is shown below:

It is observed that while Housing Loans have increased at a high rate, housing prices
have increased at a stable rate with the All-India HPI recorded a sequential increase (i.e.,
Q3FY18 over Q2FY18) of 2.4%.

9. Capital augmentation
 In August 2015, GoI rolled out a seven step ‘Indradhanush’ plan to improve
performance of public sector banks (PSBs). Under the initiative, government has
estimated total capital requirement of PSBs at Rs.1,80,000 crore over the next four
years until 2019.

3|Page Analytics Division, DBS, CO

 Japan Credit Rating Agency Meeting

 Further, as per the Finance Ministry’s announcement on Oct 24, 2017, with a view
to support credit growth and job creation GoI had decided to take steps to capitalize
PSBs. As per the press release, capital infusion will be about Rs. 2,11,000 crore
till Mar-19, through budgetary allocation of Rs.18,139 crore, recapitalization bonds
of Rs.1,35,000 crore and the balance through raising of capital by banks from the
market while diluting government equity (estimated potential Rs. 58,000 crore).
 Subsequently, on Jan 24, 2018, GoI announced infusion of Rs.88,139 crore in
PSBs during FY18.
 During FY19 so far, GoI has infused Rs.11,336 crore in 5 PSBs.
 The GoI burden for capital infusion for PSBs as a whole was reduced as Life
Insurance Corporation of India (LIC) got cabinet approval for acquisition of 51%
stake in IDBI Bank, which had CRAR of 9.22% at Jun-18, below the minimum
regulatory requirement of 10.875% (including CCB).
 The current capital position of PSBs has been helped by GoI infusion and as a
result, PSBs as a bank group reported CRAR of 11.44% at Jun-18. Bank group
wise CRAR and CET1 ratio is presented below in chart.
20% CRAR for various Bank Groups (%)
19% 18.24% PSBs
18% 19.06% 18.02%
17% 16.40% 16.18%
16% 16.43% PvtSBs
15.68%
15% 15.53%
13.62%
14%
13.26% 13.63%
13% 13.83% FBs
12%
11.82% 12.13% 11.66%
11% 11.44%
10% SCBs
Mar-16 Mar-17 Mar-18 Jun-18

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 Japan Credit Rating Agency Meeting

20% CET1 ratio for various Bank Groups (%)

18% PSBs
18.04%
16% 17.05% 16.95%
15.26%
14% PvtSBs
13.11% 13.12% 12.97%
12% 12.91%
10.43% 10.65%
10% 10.46% 10.74% FBs

8% 8.66% 8.41% 8.29%

8.47%
6% SCBs
Mar-16 Mar-17 Mar-18 Jun-18

 As at the end of Jun-18, 13 banks had CRAR below regulatory minimum of

10.875%, while 10 banks reported CET1 ratio below regulatory minimum of
7.375%.
 GoI infusion may not be sufficient for banks to (i) clean up the balance sheet, (ii)
comply with Basel III requirement, and (iii) support credit growth. The banks may
have to access capital markets to raise capital. However, the current valuation of
PSBs, as indicated through P/BV multiple, does not augur well for capital market
issuances. It is observed that for sixteen (16) banks, P/BV as on October 17, 2018
was less than 0.50, while for twenty (20) banks, it was below 1.0.

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5|Page Analytics Division, DBS, CO