NHB's mortgage guarantee firm gets registered

IMGC will offer guarantees against borrower defaults on housing loans, which will help expand access to housing in the country

National Housing Bank on Tuesday said its subsidiary, India Mortgage Guarantee Corporation (IMGC), had got registered with the Reserve Bank to function as the first such company in the country. IMGC will offer guarantees against borrower defaults on housing loans, helping expand access to housing in the country, NHB said.

NHB holds 38 per cent of IMGC, while Genworth has 36 per cent stake. Asian Development Bank and IFC, members of the World Bank Group, have 13 per cent stake each in the joint venture company. To begin with, the company will have paid-up capital of Rs 135 crore so to meet RBI regulations, with the authorised share capital being Rs 750 crore, NHB said.

The corporation’s primary clients will be housing finance companies (HFCs) and banks that are responsible for the majority of mortgage lending.

IMGC will provide credit guarantees to banks and HFCs on behalf of the borrowers. The lending institutions, having taken guarantee cover from a mortgage guarantee company, can benefit from capital relief against such guaranteed loans through lower risk weights, NHB said.

The company will leverage the learning from its technical partner, Genworth, to bring best practices to the market and from the rich experience of NHB, the apex institution and the regulator, NHB Chairman and Managing Director R V Verma said.

Mortgage guarantee will spur expansion in the housing finance sector and provide it stability, as it involves commercial and supervisory oversight by the company, as well as its regulator, the Reserve Bank of India, Verma said.

Mortgage guarantee operations will improve opportunities for home ownership in the country by making home loans more accessible to a larger segment of the population, it said.

The increased access will result from lower down payment requirements for borrowers due to additional security provided by the mortgage guarantee, it said. However, the lenders will be required to adhere to prudent appraisal standards for all borrowers covered by the mortgage guarantees to ensure that the loan portfolio quality is always maintained, it added.