Banks prefer home loans to industrial credit : RBI
By “Banks seem to pref | 23 Mar 2004
“Banks seem to prefer interest rate risk to credit risk, and as long as the fiscal deficit is high, this option will always be available to them,” RBI deputy governor Rakesh Mohan said
He also said the banks’ interest rate risk preference was due to their assets, which were largely long-term government papers, in tradeable form.
According to him, housing finance was emerging as a competitor (because of securitisation and high recovery) for project finance, he said the ability of banks for long-term industrial financing was limited and therefore asked India Inc to tap the markets.
“Given the maturity profile of their assets and liabilities and the existing fiscal deficit, banks’ ability to lend in the medium- and long- term seems to be limited,” Mr Rakesh Mohan said, adding the maturity structure of liabilities of banks was essentially short-term in nature, making banks keep the maturity of their loans short.
In
terms of the broad framework of industrial financing,
he said, “it is clear that there is sufficient room
for a greater role for market financing.”
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