Skip to main content

Will housing loan from any bank really guarantee peace of mind?

As a common misconception, we believe, taking loan for a property is sure to enable us buy a genuine property free of litigations as the bank would verify all the legal credentials of the property. We need to think again on that.  Non-performing asset ratio for a bank shows those loans which are not giving returns to the bank. They comprise a variety of loans including housing loans. A better approach for selection of a bank for housing loan will be to select a bank which has a low Non-performing asset ratio. A comparison of banks in this regard is given below.


Non-performing asset ratio: The net NPA to loans (advances) ratio is used as a measure of the overall quality of the bank's loan book. An NPA are those assets for which interest is overdue for more than 90 days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans. 

Source Data: Equitymaster research

The NPA ratio is one of the most important ratios in the banking sector. It helps identify the quality of assets that a bank possesses. If we look at the chart below, we can clearly see a differentiation between India's largest banks. A bank such as ICICI Bank would garner one of the highest NPA ratio amongst private banks on the back of its aggressive nature. As the banks lends out strongly to customers, the chances of them defaulting also rises. Plus, considering that private banks charge higher interest costs would only make things more difficult for its customers. At the same time, the NPA ratio of a relatively much conservative bank such as HDFC Bank would remain low. It is clearly evident from the above chart. The marginal spurt in this ratio during FY09 is due to its acquisition of Centurion Bank of Punjab.

Further, Axis Bank has done well in the recent past to bring down its NPA ratio. So is the case for Bank of Baroda (BoB). PNB has done well to keep its NPA levels low as well. As for India's largest bank SBI, its NPAs are relatively much higher than that of its PSU peers. This can also be attributed to its aggressive period over the past few years.

Ref:

Comments

Post a Comment

Popular posts from this blog

Best IELTS and English language training institutions in Hyderabad

IELTS stands for International English Language Testing System. As the name implies it is basically an English test for testing the proficiency of the language in an individual.  Training for IELTS can be taken to pass the IELTS exam or to develop good english language skills. I am giving the training institute addresses for Hyderabad. The test system is jointly managed by the British Council,IDP education ltd and University of Cambridge ESOL Examinations and more than 1 million candidates are taking the exam all over the world. The test has two versions : 1. Academic 2. General training Academic  version is for people who plan to continue their higher education by enrolling in universities in countries like US,UK,Australia,Canada,New Zealand etc.The academic institutions in these countries consider the IELTS score as a criteria for the admission process. General training is mostly for immigration purposes in countries like Australia,New Zealand,Canada etc. It may ...
9 comments
Read more

How to use home loans most effectively for tax benefits

1) Deduction on interest: If you are paying EMIs for a home loan you took to buy a house, the interest component in the EMI can be claimed as deduction. You must be both an owner and a co-borrower (in the loan) to claim tax benefits. This deduction can be claimed starting the year in which the construction of the house is completed. Suppose the construction of your house was completed on August 30, 2014, you can claim deduction for interest for the entire 12 months in financial year 2014-15. So every year a maximum of Rs. 2 lakh can be claimed for a house that you use for your own residence. If your house is rented, the entire interest for the year can be claimed as deduction. The interest payments for the year shall result in a loss under the head 'income from house property'. This loss can be adjusted against in the same year against other heads of income in your income tax return including salary. Therefore, it reduces your total taxable income and the tax you pay thereon. A...
2 comments
Read more

Intellectual battle against ISIS as important as Military: Sheikh Makhtoum of Dubai

The global financial crisis taught the world how profoundly interdependent our economies have become. In today's crisis of extremism, we must recognize that we are just as interdependent for our security, as is clear in the current struggle to defeat ISIS. Mohammed bin Rashid Al Maktoum, VP and prime minister of the UAE, ruler of Dubai If we are to prevent ISIS from teaching us this lesson the hard way, we must acknowledge that we cannot extinguish the fires of fanaticism by force alone. The world must unite behind a holistic drive to discredit the ideology that gives extremists their power, and to restore hope and dignity to those whom they would recruit. ISIS certainly can – and will – be defeated militarily by the international coalition that is now assembling and which the UAE is actively supporting. But military containment is only a partial solution. Lasting peace requires three other ingredients: winning the battle of ideas; upgrading weak governance; and ...
Post a Comment
Read more