GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF FINANCIAL SERVICES
UNSTARRED QUESTION NO 538
TO BE ANSWERED ON 04.03.2008
Phalguna Saka Losses from Sub Prime Mortgages Question .
SHRI RAJEEV CHANDRASEKHAR
Will the Minister of FINANCE be pleased to state:-
(a) whether Government is aware that significant losses have been suffered by large financial institutions especially from sub-prime mortgages in the United States of America (USA) and further that slowdown of USA`s economy is causing losses in financial mobilization for retail loan / mortgages;
(b) if so, what is the data Government has on the total exposure of the domestic financial sector to retail assets, including home mortgages, consumer loans, credit card debt; and
(c) what assurance could Government give to ensure that there is adequate systemic oversight on this issue?
The Minister of State in the Ministry of Finance
(Shri Pawan Kumar Bansal)
(a) So far, no specific instance of significant losses suffered by large financial institutions in India especially from sub-prime mortgages in the USA has been noticed. Some slow down observed in the overall credit growth and in the retail segment has been largely due to various policy measures and higher interest rates.
(b) The retail loan portfolio of the banks comprises housing loans, consumer durables, credit card receivables, auto loans and other personal loans. Details of amount outstanding in the retail portfolio of the banks, as at the end of March, 2007 and December, 2007, are as under:-
(Rs. in crore)
Retail Loan Portfolio
As at 31st March, 2007
As at 31st December, 2007
Loans for Consumer Durables
Credit Card Receivables
Other Personal Loans
Total Retail Loans
(c) National Housing Bank (NHB) regulates the housing finance companies in the country. Systemic oversight for housing finance companies (HFCs) is provided for in terms of the statutory provisions of the National Housing Bank Act, 1987 and the Housing Finance Companies Directions, 2000 issued under the Act. These, inter-alia, cover entry level regulation, measures to ensure financial health and risk, mitigation through prudential norms for capital adequacy, asset classification, income recognition, provisioning, limit for exposure and credit concentration, etc. Reserve Bank of India (RBI) also has an elaborate systemic oversight mechanism for the banks operating in India and Indian banks abroad. Further, there is a mechanism for supervision through onsite inspections, off-site monitoring through periodic financial returns, etc. by NHB and RBI to effectively monitor the functioning / financial position of the entities regulated by them, on an ongoing basis.