LIC Housing Finance to aggressively use OTS, ARC for loan recoveries

LIC Housing Finance, the largest home finance company, will aggressively use One-Time Settlement Scheme (OTS) and sale to asset reconstruction companies (ARCs) for the recovery of stressed loans, T. Adhikari, the company’s newly-appointed chief executive officer (CEO) managing director (MD) said.

Till date, LIC Housing Finance has been using normal channels, including the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, to convince borrowers to repay, Adhikari said in the analysts call while announcing the results of the first quarter of the financial year 2023-24 (Q1FY24) on Friday.

Typically, follow-up starts immediately on the loan becoming delinquent, with various mechanisms such as tele-calling, contacting borrowers, SMS, e-mails used on a regular basis.

In May 2023, the company had guided for the recovery of Rs 400-500 crore through resolutions in FY24 from exposure to developers.

Its provisions for Expected Credit Loss (ECL) stood at Rs 7,590.68 crore as on June 30, 2023, up from Rs 6,141.03 crore as on June 30, 2022.

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Its gross non-performing assets (GNPAs) were flat at 4.96 per cent at end of June 2023 compared to the year ago period.

The company had written off Rs 544.71 crore during FY23, in comparison to just Rs 23.03 crore written off in the previous year.

As for the business performance, while its loan book expanded 8 per cent year on year (Y-o-Y) basis to Rs 2.76 trillion, its disbursements declined sharply by 40 per cent (Y-o-Y) from Rs 15,202 crore in Q1FY23 to Rs 10,856 crore in Q1FY24.

The company officials in analyst interaction said some teething issues in operations of technology platform were witnessed in the initial part of the quarter (April and May), which led to transitory impact (on business).

Whenever changes take place in an organisation, there is bound to be some disruption, company officials said.

Technology is boon, but sometimes things do go wrong, they said.

The system has stabilised now. The organisation restructuring and technological changes will yield positive outcomes, they added.

Also Read: LIC Housing Finance hits 10-month high on 43% YoY net profit growth in Q1

In May 2023, its then MD & CEO Y V Gowd said growth rates in the individual home loan books should be at least minimum of 12-15 per cent and the overall rate of 10-12 per cent in FY24.