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Banks need to be more vigilant to curb Housing Loan Default cases

Owing to high inflation woes, the Reserve Bank of India (RBI) has refrained from cutting key policy rates drastically. The high interest rates have deeply affected the loan repaying capacity of borrowers to banks.Therefore, the banks are refraining from issuing big ticket loans and now the focus for the banking industry is again the small size consumer and home loans. However, the bad loan woes are somehow haunting the banking officials even in the 'safest' loan category, home loans.

The banks have reported over 100 cases of housing loan defaults/ frauds during the January-March quarter.

These banks have already suffered losses to the tune of Rs2,398 crore this quarter. Last year, due to fraudulent activities, they underwent a loss of Rs18,052 crore, of which Rs17,291 crore was classified as loan write-off amount. 

“Despite all possible measures, sometimes it is difficult to identify a trickster. Often, we have found that they pay the loan amount diligently for the first six or seven months, and suddenly they stop paying. Tracking down the defaulter becomes all the more difficult, as the information given by him is false,” said Hamsini Menon, managing director, State Bank of Mysore.

There are times when same flat is further sold to different people. In such cases the banks have limited scope of checking which is quite apparent.

“Many states like Karnataka and Andhra Pradesh, which have taken a proactive and a strong stand on e-governance are good examples of how this can happen. In the long run, such a process will be beneficial in bringing about transparency and reducing incidents of false security documents,” said Robin Roy, director, financial services, PwC India. He said the problem with PSU banks is that they often take a very process- oriented approach to check background (due diligence) of potential borrowers.

“Many a time, it all depends on how diligent the bank is while carrying out such checks. Regular visits and follow-ups for at least large ticket loans become important, and one can only expect every officer/branch to be equally efficient,”he said.

 

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