Indian Banks Gain Ground in Home Loan Market at Expense of Small Non-Bank Lenders

Strategic Insights -

A shift is underway in the Indian home loan market, with large banks like SBI, ICICI Bank, and Kotak Mahindra Bank benefiting from the trend of homebuyers transferring their mortgages to these lenders. Despite a slight increase in first-time homebuyers in the market, large banks have managed to grow their mortgage portfolios through balance transfers, which are facilitated by record low interest rates offered by these lenders. This shift has resulted in the contraction of mortgage loan growth for non-bank lenders like PNB Housing Finance, L&T Finance, and LIC Housing Finance.

Key Takeaways:

  • Large banks like SBI, ICICI Bank, and Kotak Mahindra Bank have seen their mortgage portfolios grow through balance transfers, with ICICI Bank crossing the Rs 2 lakh crore mark in November.
  • SBI grew its mortgage book at a healthy pace with home loan sanctions up 29% in the September quarter over a year earlier.
  • Private lender Kotak Mahindra Bank is offering rates as low as 6.75% to customers wanting to transfer their home loan balances.
  • Major non-bank lenders like PNB Housing Finance, L&T Finance, and LIC Housing Finance have lost out in the home loan growth race, but industry executives expect them to bounce back in the coming quarter.
  • IIFL Finance recorded 2% growth from a year earlier in its mortgage book at the end of September, while LIC Housing Finance saw 2-3% of its loans transferred out in the September quarter.
  • PNB Housing Finance has seen a contraction in its book due to balance transfers, while L&T Finance Holdings saw a 70% decline in home loan disbursements and a 50% shrinkage in its overall book.

Statistics:

  • ICICI Bank crossed the Rs 2 lakh crore mark in mortgage loan portfolio in November.
  • SBI's home loan sanctions up 29% in the September quarter over a year earlier.
  • Kotak Mahindra Bank offering rates as low as 6.75% to customers wanting to transfer their home loan balances.
  • 2-3% of LIC Housing Finance loans were transferred out in the September quarter.
  • 4-5% of LIC Housing Finance incremental disbursements were towards balance transfer.
  • PNB Housing Finance's assets fell at the end of September.
  • L&T Finance Holdings home loan disbursements fell 70%.
  • Repco Housing Finance saw higher balance transfers and lower disbursements leading to loan growth sliding to 5%.
  • HDFC recorded more incoming balance transfers than those transferred out in the September quarter.

Sources:

  • Times of India
  • Business Standard
  • Economic Times
  • India Mortgage Guarantee Company
  • SBI
  • ICICI Bank
  • Kotak Mahindra Bank
  • IIFL Finance
  • LIC Housing Finance
  • PNB Housing Finance
  • L&T Finance Holdings
  • Repco Housing Finance