Idbi To Set Up Housing Fin Subsidiary

The board of directors at Industrial Development Bank of India (IDBI) on Thursday decided to set up a wholly owned housing finance subsidiary with an initial investment of Rs 100 crore.

"This will help us when we eventually convert into a universal bank, as the accounts will be merged with the institution," said IDBI chairman P P Vora.

IDBI has not ruled out divesting some percentage of the housing finance arm to a strategic investor at a later stage. The idea behind setting up a subsidiary instead of incorporating the housing finance activities within the term lending institution is with a view to take advantage of the long term refinance available from the National Housing Bank (NHB) at low interest rates.

Senior IDBI officials further added that as a housing finance subsidiary registered with NHB, it would be able to tap funds from banks and multilateral agencies.

Speaking to the press on the issue of non-performing assets (NPAs), Vora said: "In a term-lending portfolio of a financial institution a project in implementation should not be considered as a NPA".

He branded the 180-day stipulation for terming an NPA as not being fair to greenfield projects, and said that these were a major cause for IDBI's NPAs.

IDBI's gross non-performing assets for the first six months ended September 30, 2001 continued to remain at March 31, 2001 levels at 18 per cent. In absolute terms however, they rose from Rs 10,879 crore as on March 31, 2001 to Rs 11,224 crore as on September 30, 2001. The net NPA level continued to stand at 14.8 per cent (Rs 8,600 crore).

The board cleared financial assistance to the tune of Rs 535 crore towards two projects. One for Rs 500 crore was cleared for a AAA-rated corporate. "We intend to sanction funds to good AAA-rated borrowers, whereby the downside of NPAs is minimal," he added.