The federal government has given clear message to their bankers for be careful at the time of mortgage loan funding to their customers. Govt said it is the biggest reason for sub prime slow down in market. Financial institutes need to do hard underwriting in all loan applications and should avoid funding to all financially unhealthy customers. Banks should focus on small and medium ticket size funding against mortgage loan rather then doing big ticket size cases under loan against property or Home loans. Lenders should be very careful while funding property mortgage loan. Book size of bank will stuck when a little amount of account will default in paying their repayments. Balance transfer of any loan account is also very risky for the banks. NPA account should not be more then 1% of over all account of books.
In India all banks should start doing the same thing in their execution. All the banks should start doing hard credit in India. We are going in to another sub prime if we do not take strong steps. Mortgage loan and home loans are long tenure loan and if any default happens in loan repayments, banks has to be bear a big loss. So if we want to save our economy then we will have to take these kind of steps on daily basis in India. Private sector bank in India like HDFC Bank, ICICI Bank, Axis Bank have very strong set up of their credit team. They do very strong credit on all loan applications, apart from banks all NBFCs like HDB, Reliance, Tata Capital, DHFL and many more financial institutions are doing very aggressive work on secured products.
They are doing medium size of loans and small size of ticket size of loan in market. India bulls has already stop funding of more then 1 crore of amount in Mortgage loan. Current focus of all NBFC is small ticket size of customers and most of them are new to mortgage loan. Credit tested customer is one of the good pieces in market and every financial company wants to fund them. All the NBFC in India are doing very well in market and this time very good competition comes in market and this is very good for customers. Normally Banks and NBFC in India has very healthy book size of customer base and they have very good market in secured and unsecured segments. Banks have healthy customer portfolio in their bucket and they use it very strongly. So banks need to do hard underwrite in Mortgage Loan Process.