Idbi Plans To Float Housing Finance Arm

The Industrial Development Bank of India (IDBI) is planning a 100 per cent subsidiary for its foray into the housing finance sector. The financial institution has already discussed the proposal with the apex housing finance bank, the National Housing Bank (NHB), but no final decision has been taken yet.

This is likely to kick off retailing of IDBI's new assets. "We need to tap the retail route where the returns are high and the non-performing assets could be low," IDBI chairman PP Vora said.

At the first stage, IDBI will not look for a partner for the outfit. "We will start with a 100 per cent housing finance subsidiary, and may be at a later stage we can rope in a partner.

Nothing has been finalised," he said. Vora also ruled out acquiring an existing housing finance company, a proposal it had considered earlier.

Explaining the rationale of floating the housing finance subsidiary, Vora said, "Retail financing requires a different mindset and hence we may not make housing finance a part of IDBI's business activities."

In an aggressive plan to bring down the non-performing assets (NPAs), IDBI has decided to crack the whip on errant corporates where promoters are at fault for not paying up dues. "We can't let these corporates go scot free. A plan is being made to take them to task," Vora said. He refused to elaborate on the issue at this point. IDBI's net NPA is pegged at over 14 per cent (Rs 8,300 crore). "Where there are management-related problems, we will need to deal with them and reduce our NPAs from there," he pointed out.

IDBI, at the same time, will "practice patience and persuasion" where the problem is industry specific. "We will go for restructuring," said Vora. The institution will also exercise patience and stand by the unit where the promoters are experiencing temporary problems such as shortage of raw materials or power.