PNB Housing Finance has raised $200 million through external commercial borrowing (ECB) for a tenor of five years. The fund raising through the automatic route is a first for the company after the RBI had earlier allowed housing finance companies to borrow through ECB under the automatic route. The funds will be used for normal business operations mainly, lending purpose, the company said.
PNB Housing Finance MD Sanjaya Gupta believes that raising of ECB under the current environment shows girth of the company and deep faith of the lending community. “This will not only enhance our liquidity profile but also further enhance our asset liability management (ALM) position as the facility is for 5 years. The fully hedged landed cost of this facility is lower than on shore pricing of similar tenure loan,” Gupta said.
On October 5, the monetary policy committee of the RBI decided to keep the repo rate unchanged at 6.5%. Viral Acharya, deputy governor of RBI, speaking on the occasion, urged all financial firms to place greater reliance on equity and other modes of long term finance for funding of long-term assets rater than relying excessively on short-term wholesale paper.
“Chasing lower marginal costs of funding in order to retain or acquire market share in lending is a myopic strategy; it is associated with significant rollover risks in the medium term and the practice appears to have led to a form of maturity rat race in the financing of the financial sector,” Acharya said. “Increasing asset liability mismatch in this manner can be a particularly imprudent policy in a time of global and domestic tightening conditions. It is best to avoid this in order to safeguard financial firms’ own balance sheets as well as for financial stability,” Acharya added.
The company looks to raise additional funds through this route in the near future. Kapish Jain, CFO, PNB Housing Fin, said the RBI has allowed NBFCs to borrow ECB up to $750 million annually.