Real estate loans register highest repayment defaults

O P Bhatt, chairman, State Bank of India, today said bank non-performing assets (NPAs) in the country had begun to rise, with the highest defaults being reported in the real estate sector. Bhatt warned that NPAs were expected to spill into other sectors as well, as inflation had not shown signs of moderating, while infrastructure bottlenecks continued/finance/banks/SBI/images

He said, the extent of NPAs had risen about half a per cent to about 3 per cent - 4 per cent. Though, at the moment there was no cause for concern, there was reason "to think, plan and act," he said.

"Whenever economic cycles turn one way or the other, there may be a lag effect /finance/banks/SBI/images. there can be consequences," he said, adding, "It is prudent to take action."

As a result of demand exceeding supply, which has been held down by infrastructural bottlenecks, inflation at above 6 per cent in the second half of 2006, has been above the Reserve Bank''s tolerance limit of between 5 and 5.5 per cent for the financial year 2006-07, despite the RBI''s efforts to contain it with monetary measures and the government''s attempts to drive it down with policy initiatives.

State Bank expects credit to grow by of 25 per cent in financial year 2007-08, compared to the previous year, against a 20-per cent growth in deposits.