Public sector banks in India are dealing with a high number of defaults in home loans segment up to the amount of Rs. 5 lakh. High interest rates and soaring inflation are said to be the reasons why small borrowers are finding it difficult to service loans on time.

Most number of defaults have occurred in home loans up to Rs. 2 lakh and from Rs. 2 to 5 lakh in the current fiscal.

To tackle the growing number of delinquencies in home loans segment, banks are disbursing loans very carefully. The total number of home loans in Rs. 2 to 5 lakh segment, that were sanctioned this fiscal have come down by 42 percent, standing at to Rs 6,579 crore. For home loans less than Rs. 2 lakhs, the disbursals have declined by 7 percent, standing at Rs 5,352 crore.

But for loans more than Rs. 5 lakhs, the defaults in loan repayment have come down. This is good news for banks considering the fact that banks disburse more loans in Rs. 10 to 25 lakh bracket.