The National Housing Bank (NHB) on Monday announced formation of an Indian Mortgage Guarantee Company, a joint venture with US-based financial security company Genworth, the Asian Development Bank and the International Finance Corporation.
This is the first mortgage guarantee company in India. Its aim is to offer credit risk coverage in the form of guarantees to housing finance companies and banks in case of borrowers defaulting. This would help mortgage lenders avoid piling bad debts in their books.
NHB holds 38 per cent stake in the venture and Genworth 36 per cent, while ADB and IFC have 13 per cent each.
The initial paid-up capital is Rs 120 crore, to be increased over time to support the new company’s growth.
“We have received the Foreign Investment Promotion Board’s approval and will be applying to the Reserve Bank of India for registration in a couple of days,” said R V Verma, chairman and managing director of NHB. IMGC will be a purely commercial venture.
The company will begin marketing operations and develop internal operational policies before it gets registered with RBI.
The company will have processes for approving lenders and housing loans for guarantee cover and help in maintaining the asset quality of lending institutions. “Adapting itself to the Indian context with a range of customised products for the lending industry and borrowing community, the company will operate under the regulatory jurisdiction of RBI,” Verma told Business Standard. On the products it would offer, the CMD said these would be discussed at the first board meeting, on July 25.
IMGC is expected to focus on residential mortgage-backed securitisation and growth of the secondary mortgage market. Thomas Davenport, IFC Director for South Asia, said the new company will help expand access to affordable housing finance across income segments and regions.
Lakshmi Venkatachalam, vice-president of private sector and co-financing operations at ADB, said IMGC would not only benefit banks and housing finance companies but also many new home loan borrowers.
Stuart Take of Genworth’s global mortgage insurance division said the joint venture would allow Indians to accelerate their dream of home ownership.