REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA - JUNE, 2001
ASSET QUALITY IN HOUSING FINANCE
Asset quality has assumed a considerable significance in the light of increasing level of Non Performing Assets (NPAs) in the Banking sector. However, housing finance is the only sector in the financial system where the level of NPAs has remained very low. This is the major reason for more and more players getting into the business of housing finance over the last couple of years. The low off take of credit by the corporate sector forced banks’ to look for new investment avenues and they observed that housing finance was the optimum solution because of considerably high growth rate witnessed in this sector coupled with characteristically very low NPAs. The fact that housing finance is a compartively safe business can be observed from the fact that during the last three years, the proportion of NPAs to total assets of the HFCs approved by NHB for its refinance assistance (these HFCs account for more than 98% of the total business of all HFCs) has been declining. The proportion of gross NPAs to total assets of these companies decreased from a level of 3.02% as at the end of March,1999 to 2.83% as at the end of March,2000 and further to 2.52% as at the end of March,2001.
There were 29 HFCs(excluding HUDCO) approved by NHB for its refinance assistance as at the end of March, 2001. For the purpose of analysis, these companies have been grouped according to their asset size as given below:
Table1: Asset Base of Approved HFCs
Asset Size No. of Companies
Up to Rs.150 crore (Group A) 14
Between Rs.150 crore and Rs. 500 crore (Group B) 10
Above Rs.500 crore (Group C) 5
(Asset size as on March 31, 2001)
However, the data pertaining to four companies (approved by NHB for its refinance assistance in 2000) is available only for the year ended 31st March, 2001. Accordingly, the analysis given in this chapter is based on the data in respect of 25 companies only [Group A – 11, group B – 9 and Group C – 5].
Total assets of these companies increased from Rs. 23178.84 crore as at the end of March, 2000 to Rs. 28754.84 crore by 31st March, 2001. During the same period gross non-performing assets increased from the level of Rs.653.39 crore to Rs.725.72 crore. However, in the percentage terms, the proportion of gross NPAs to total assets has declined from 2.82% as at the end of March, 2000 to 2.52% as on 31st March, 2001.
Similarly, the net NPAs which were Rs. 544.50 crore as on 31st March, 2000, increased to Rs. 631.66 crore by the end of March, 2001. However, the proportion of net NPAs to total assets followed the same trend as noticed in the case of gross NPAs and it declined from 2.35 % on 31st March, 2000 to 2.20% as on 31st March, 2001.
In the case of HFCs with asset size up to Rs.150 crore the gross NPAs are increasing over the years and stood at Rs.3008.39 crore as at the end of March, 2001 as compared to Rs.1758.90 crore at the end of March, 1999. Similarly, the proportion of gross NPAs to total assets for this category witnessed a increase from the level of 3.82% as on 31st March, 1999 to 5.03% by the end of March, 2000 and further to 5.34% by the end of March, 2001. A similar trend was observed in the case of net NPAs. The proportion of net NPAs to total assets of these companies increased from 3.57% as on 31st March, 1999 to 3.91% by the end of March, 2000 and further increased to 4.33% by end of March, 2001.
In respect of HFCs having asset size above Rs.150 crore and up to Rs.500 crore the gross NPAs have increased from the level of Rs.214.81 crore as on 31st March, 2000 to Rs.271.20 crore by the end of March, 2001. However in the percentage terms the proportion of gross NPAs to total assets of these companies is on the decline and this percentage share declined from 13.75% as at the end of March, 1999 to 13.59% by the end of March, 2000 and further to 10.06% by the end of March, 2001. The variation in the proportion of net NPAs to the total assets has been similar to the variation observed in the case of proportion of gross NPAs to total assets. It decreased from 11.62% to 11.43% during 1999-2000 and further to 9.59% during 2000-2001.
For companies having an asset size above Rs.500 crore also a trend similar to the companies with asset size above Rs.150 crore but less than Rs.500 crore is observed in respect of NPAs as a percentage of total assets. This proportion decreased from 2.16% at the end of March, 1999 to 1.98% as at the end of March,2000 and further declined to 1.66% by the end of March,2001. Similarly, the proportion of net NPAs to total assets for these companies decreased from 1.82% to 1.65% during 1999-2000 and further to 1.37% during 2000-2001.
Table 2: NPAs for Various Groups of HFCs Classified according to Asset Size
(Rs in Crore)
Total Assets Gross NPAs Gross NPAs as % of Total assets Net NPAs Net NPAs as % of Total assets
Group A
1999 439.50 16.81 3.82 15.70 3.57
2000 351.89 17.69 5.03 13.76 3.91
2001 559.49 30.08 5.38 24.22 4.33
Group B
1999 1393.85 191.70 13.75 161.91 11.62
2000 1580.08 214.81 13.59 180.54 11.43
2001 2696.99 271.20 10.06 258.77 9.59
Group C
1999 17918.94 387.08 2.16 326.28 1.82
2000 21246.88 420.89 1.98 350.20 1.65
2001 25498.37 424.43 1.66 348.66 1.37
Total
1999 19752.29 595.58 3.02 503.89 2.55
2000 23178.84 653.39 2.82 544.51 2.35
2001 28754.84 725.72 2.52 631.66 2.20
Note: It may not be possible to draw a direct comparison with the figures published in the last report due to regrouping of HFCs on the basis of their asset size as on 31.3.2001
In terms of the classification of NPAs as per the prudential norms, the sub-standard assets accounted for more than three-fourths of the total NPAs during the year 1999 but by the year 2001this share declined to 53.21%. During the year 1999, the share of doubtful assets in the total NPAs was around 20% but this increased substantially to 46.68% by the end of March, 2001. This decrease in the share of sub-standard assets is approximately equal to the increase in the proportion of doubtful assets in the total NPAs. This indicates that the accounts, which have become sub-standard during the last couple of years have shown no improvement and as a result many of those accounts have become doubtful over the period of time.
Table 3: Break-up of Non-Performing Assets
(per cent)
Category/Year 1999 2000 2001
Sub-standard 78.39 65.98 53.21
Doubtful 18.69 33.63 46.68
Loss 2.92 0.39 0.11