Mumbai: Bad loans in India are beginning to increase, with the highest rise occurring in the real-estate sector, State Bank of India chairman O.P. Bhatt said on Friday.
Bad loans were expected to spill into other sectors as well, as inflation was not moderating and infrastructure bottlenecks continued, he added.
The incidence of bad home-loans was about 3-4%, or about 0.5% higher than earlier, he said, without specifying the time period.
Fair warning: State Bank of India chairman O.P. Bhatt warns that bad loans could spill into other sectors as well
“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,” the SBI chairman said. “It is prudent to take action.”
Inflation is running just above 6%, but analysts expect it to dip below 6% in coming weeks. The Reserve Bank of India (RBI), in its policy review on Tuesday, 24 April, cut its medium-term inflation goal to 4.0-4.5% from 5%.
The country’s top lender sees loan growth at 25% in the fiscal year ending March 2008, compared with about 28% the previous year, Bhatt said.
The bank’s deposits were expected to rise by 20% in the current fiscal year, compared with the previous year’s 16-17% expansion, he said.
RBI on Tuesday left its main lending rate steady at 7.75%, after jacking it up five times in less than a year to check inflation. The central bank, in its policy review, said it aimed to slow credit growth of about 30% a year to 24-25% in the current fiscal.