In the wake of the bribes-for-loans scam, housing finance regulator National Housing Bank (NHB) is set to tighten norms for housing finance companies (HFCs) to make their functioning more transparent. NHB has called a meeting of the chiefs of HFCs this week and sought details of their exposure to builders and corporates. NHB also sought data on the quality of assets, security and procedures on sanctioning loans.
RV Verma, CMD, NHB, confirmed the development to FE: ?We have a system of monitoring HFCs?s exposure to different categories of borrowers and the status of NPAs through submission of monthly returns. We have now asked for more data and details regarding exposure to builders and corporates. We will closely examine the issues relating to their internal processes and compliance system for the prudential regulations and would see that they are more transparent, he said.?? He, however, added that NPAs among HFCs are very low at less than 1%.
Keki Mistry, vice-chairman and CEO, HDFC said HFCs should guard against losses. ?HFCs don?t have much NPAs, but they must change their way of functioning to ensure that loans go to genuine parties.?? he said.
Gagan Banga, CEO, Indiabulls Financial Services agreed there was a need for the senior management to be involved in sanctioning loans. ?The board has to be more active in the decision-making process,?? he said.
According to an Icra report on on home finance, banks which hold around 70% of the total individual home loan market, are expected to maintain a sizable market share, even as HFCs are likely to grow by offering superior service levels and tapping underdeveloped segments. Growth plans of new HFCs could also increase the overall market share of HFCs, said the report. Although housing loans remain the main source of revenues for small HFCs, the proportion of other loans in their loan book increased to 8% as on 31 March, 2010 from 7% the previous fiscal.
As of March 31, 2010, HDFC (along with HDFC Bank), SBI , ICICI Bank (along with ICICI Home Finance,) and LICHFL dominate the mortgage market, accounting for 55% of housing credit.
There are smaller HFCs with smaller portfolios operating in their respective geographies or serving niche customers. Over the years, they have been growing their portfolios rapidly.
Vibha Batra, senior vice-president, Icra said that HFCs continue to maintain superior asset quality. ?The top five PSBs had a gross NPA percentage of 2.6% in their housing finance book as on 31 March, 2010, against which HFCs had 0.9%,? she adds. Credit provisions were low for HFCs at 0.07% in relation to average advances, in 2009-10 with the asset quality profile remaining comfortable.