Teaser home loans offering attractive interest rates to borrowers had brought a surge in the home loan market in the last one year. But this boom has subsequently started experiencing its side effects too. The number of bad assets created from these loans is also seeing a rise in equal temperament. Seeing this, Reserve Bank of India has directed banks not to dilute their credit appraisal standards. After the global economic slowdown which had dipped the home loan market growth to 20% in 2009-10 and a devastating 4% in 2008-09,the Indian economy is seeing a recovery with the home loan market growing at 30% till September 2010. The second financial stability report released by RBI recently said that although the home loan market is showing staggering growth , there has been a subsequent rise in non performing assets (NPAs) too. "As the economy recovers and regains the higher growth trajectory achieved before the crisis, banks will need to guard against any dilution in their credit appraisal standards," cautioned the banking regulator. "Credit acceleration was evidenced across segments. However, it was particularly marked in case of infrastructure advances and retail credit. Increase in advances in both these segments has to be viewed with caution," the central bank said. "Asset quality continues to pose some concerns as the growth in NPAs outstripped growth in advances leading to a deterioration of gross NPA ratios. These ratios deteriorated despite increased write offs and one time settlements," RBI added. Besides rising concerns in the home loan segment, the personal loan segment is also posing threat to banks owing to rising NPAs in this segment too.
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