High prices & interest rates strain repayments in small ticket home loans segment
By Joseph Samson
Sep 24, 2012
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Banks are reportedly worried with the current repayment trend in the home loans segment. Home loans of up to Rs. 10 lakh, which are popularly called small ticket home loans, are witnessing delayed repayment schedules due to untimely payment of loan amounts by the borrowers.

It is speculated that the reason for this trend could be the increase in prices and high interest rates in the economy, which has had an impact on the finances of borrowers in the segment. Although bankers say that there has not been any significant increase in the number of defaults for small ticket home loans but they can see stress in the home loans segment below Rs. 20 lakh.

On the matter, Vice President and Head - consumer lending and payments segments, Axis Bank, said that the stress in this segment is a matter of concern for banks.

Last week, government announced an interest subvention scheme under which 1% rebate will be provided on all home loans up to Rs. 15 lakh. For this scheme, the government had made a provision of Rs. 400 crore in its last year's budget. But the banks say that the subsidy has not increased the profitability of small ticket home loans for the banks. These home loans are low profits schemes due to the size of the advances. Though, they are hopeful that the subsidy will reduce the chances of defaults in the segment.

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