Rising defaults on home loans is a major social issue in Kerala

Defaults on home loans in Kerala are increasing significantly, banking sources told DH, with non-performing assets (NPAs) in the state at double levels in December 2021 compared to 2019.

Data from the State Bankers Committee suggests that 67,901 home loan accounts with an outstanding amount of Rs 3,020 crore became NPAs in December 2021 due to 90-day repayment default.

The financial stress on families due to Covid-19 and the resulting prolonged shutdowns in the state are believed to be behind the rising default rates. Not just home loans, many had taken advantage of other loans to pledge their property. Kerala has witnessed many suicides due to financial difficulties during the lockdown.

The MSME sector has suffered the most during the pandemic, which will certainly have a cascading effect on other priority sector loans, as many families depend on each unit of the MSME sector, said the president of the Bank Employees Federation of India, CJ Nandakumar.

NPAs in home loans in December 2017 stood at 49,861 with total outstanding amount of Rs 1,440 crore. This rose to 52,974 accounts with a total outstanding amount of Rs. 1,571 crore in December 2019. Although the increase was only marginal during this period, in December 2021 the amount outstanding nearly doubled to 3,020 crore rupees and the number of NPA housing loan accounts increased to 67,901.

Meanwhile, employees in the banking sector are harmed by the interventions of local political activists against bank foreclosure procedures. Banks initiate foreclosure proceedings in accordance with legal procedures based on the law on the securitization and reconstruction of financial assets and the enforcement of securities (SARFAESI law). But local political leaders often intervene citing social and humanitarian grounds, which often leads to tensions.

Recently, Congressman Mathew Kuzhalnadan even broke the lock on a house attached to a CPM-controlled cooperative bank in Ernakulam district, claiming that the seizure was initiated when the head of the family, who had two underage girls, was in the hospital. He added that the girls had become homeless.

Mr Kuzhalnadan suggested that at least the invocation of SARFAESI law in outstanding loans under Rs 10 lakh should be suspended as a relief measure.

Check out the latest DH videos