The National Housing Bank (NHB) today revamped its refinance model for housing finance companies and announced a reduction of up to 200 basis points in refinance rates from 7.25-9 per cent earlier.
NHB has introduced a fixed and a floating rate model, with banks and housing finance companies eligible to switch options on payment of the requisite fee.
Refinance will be now available for a tenure beyond 2 years instead of the earlier system, where the minimum term was 5 years.
Also, access to refinance by housing finance companies will depend on the rating assigned by NHB, which has developed an internal rating model for the purpose. In addition, the prepayment levy charged by NHB has been reduced substantially.
The rating assigned to a housing finance company will determine its eligibility for refinance as also the interest rate it will pay.
Refinance from NHB accounts for about 25 per cent of the funds requirement of housing finance companies in India.
"The scheme has been liberalised in response to the needs of the housing finance system. We expect to meet the resource requirements of housing finance companies to a larger extent," NHB Executive Director R V Verma said.
"Though the scheme provides flexibility, it also ensures the companies have to be responsive to asset-liability management," he added.
Verma said with the new system in place, NHB hopes to extend refinance of up to Rs 2,000 crore by the end of the current financial year. In the first half of 2002-93, NHB extended refinance of about Rs 200 crore.
The new refinance rates provide an incentive to the best-rated housing finance companies to get cheaper funds.
It also makes them eligible for refinance of loans extended by them as well as fresh disbursements.
"Housing finance companies can now choose the need-based repayment period in order to suit their asset-liability management," an NHB release said. It said the procedure for availing of refinance had been simplified.