IDBI shortlists 7 buyers for home loan subsidiary

Government-owned IDBI Bank hopes to sell its Pune-based, wholly-owned, home loan subsidiary by mid-January and has shortlisted seven players as potential buyers for the deal, a top IDBI bank executive said On Wednesday.

“We have received 12 proposals for the subisidiary. Out of these, seven have been shortlisted. The due diligence process is on and we hope to sell the unit by mid-January,” IDBI Bank Deputy Managing Director O V Bundellu told reporters here.

The bank has appointed IDBI Capital as the adviser for the deal, Bundellu said.

IDBI Bank decided to sell the subsidiary, IDBI Home Finance (IHFL), as it did not want to offer the same home loan products from the bank and the seperate unit.

“There is no need to run the same business from two of our own units. Hence, the options were either to merge IHFL with the bank or to sell it. Since a merger will pose issues like the integration of employees, we decided to sell the subsidiary,” a senior IDBI Bank executive said.

IDBI Bank acquired the erstwhile Tata Home Finance in 2003 for the exclusive sale of housing loan products. The subsidiary, which clocked a net profit of Rs 30 crore in FY08, has a home loan portfolio of around Rs 2,700 crore.

The lender is currently implementing the home loan package announced by PSBs early this week and expects its overall home loan portfolio to grow at a rate above the industry average, Budellu said.

“Our home loan growth rate is stable. There is enough demand from our borrowers. We expect the portfolio to grow at a rate above the industry average,” Bundellu said.

Given a rapidly easing inflation and improving liquidity conditions in the system, IDBI Bank is likely to reduce its prime lending and deposit rates in the near future after its asset liability committee (Alco) meets, IDBI Bank DMD Jitender Balakrishnan said.

“Given the way the market is behaving, interest rates should come both on lending and deposits. We may look at that option when our Alco meets in the next two weeks,” Balakrishnan said.

Non-performing assets (NPAs) in the domestic banking industry is likely to show an upward move in the aproaching months as stress is visible in certain sectors like textile and infrastructure on account of the economic downturn, Balakrishnan said.