While it took State Bank of India (SBI) ten years to scale up its home-loan portfolio to Rs 5 trillion, it is aiming to double this in the next five years at a time when there is intense competition in this segment with banks as well as mortgage lenders fighting it out to gain market share.
The bank is expecting to reach Rs 7 trillion by FY2024, it said. Currently, SBI has a market share of 34 per cent in home loan segment among all scheduled commercial banks and is providing the most competitive rates for home loans in the market right now.
In December 2020, the bank said, it registered its highest ever sourcing, sanctions, disbursements, and growth as far as home loans is concerned. Of the Rs 5 trillion home loan book, buyouts are around 23 per cent but pooled assets from shadow lenders are a very miniscule portion of the book.
To double its home loan book in the next five years, the bank is strengthening its underwriting capability so that they can improve the delivery on ground. Also, a new retail loan management system is being put in place which will certainly reduce the time taken for turnaround of loans. As of now, in the builder tie up loan category, the banks’ turnaround time is 5 days while for other categories in the home loan segment it is 12 days.
The bank is looking to use Artificial Intelligence (AI), Cloud, Machine Learning (ML), and Blockchain in propelling not only the home loan business of the bank but also other businesses.
Dinesh Kumar Khara, Chairman, SBI said, “As the market competition is building up, we are also strengthening our capabilities. We are putting in place structures so that we are in a position to increase our volumes and improve our delivery on the ground further. With the improvements we are bringing in, we will do much better. With competitive rates and faster delivery, I am confident that we can scale up the portfolio much faster”.
While the credit uptake in the economy has grown at a tepid pace, the home loan segment has done exceedingly well in these gloomy times. Hence, this gives an impetus to the lenders to be aggressive in the home loan segment as the default rates are quite low and there is an inherent demand for such loans in the market.
“When it comes to home loan demand, it is a function of the economy and the demographic. The younger generation is looking to own home at a younger age. We have observed that 42 per cent of our customer are under the age of 40 or below. Going forward, we will see a much greater shift in this direction. The increase in earnings of the younger generation, their aspirations, and the concept of nuclear family are the contributing reasons for people to aspire for homes at an early age”, Khara said.
Also, SBI’s home loan segment has bad loan ratio of just 0.68 per cent. Furthermore, of 3.9 million borrowers who were eligible for restructuring under the RBI’s covid package, only 10,000 of its customers have availed the restructuring option which totals to Rs 2,500 crore.
“These two parameters shows the quality of the book we have”, Khara said.
“Going forward, home loan will continue to be the major focus are for us as far as retail loan portfolio is concerned and we will continue to scale up in this line of business in the days to come”, he added.
The average ticket size of SBI’s home loan is around Rs 31 lakhs, which has grown from Rs 25 lakh earlier. Also, urban, semi-urban, and rural constitute is almost 51 - 52 per cent of the total book while the rest is from the metros. And, almost 72 per cent of its customer base for home loans is the salaried segment who are very well equipped to honor their commitments. Interestingly, around 60 per cent of the banks’ home loan borrowers have a minimum credit score of 750.
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