Nhb Okays Shutdown Of Indbank Housing

The National Housing Bank (NHB) has cleared the proposal to shut down the operations of Ind Bank Housing Ltd, in which Indian Bank holds a 51 per cent stake, by permitting the largest stakeholder in the housing finance company to take over its assets and liabilities.

Indian Bank would now take the proposal to the other shareholders of Ind Bank and then pass a resolution at a meeting of the shareholders of the housing finance subsidiary. The shareholders' meeting is expected to take place in the first week of September and the date for the annual general meeting will be decided then.

 

Indian Bank holds a 51 per cent stake in Ind Bank, 24 per cent with Hudco and the remaining shares are held by the public.

NHB executives said that Indian Bank was of the opinion that housing finance is a growing business and also since the portfolio of the housing finance subsidiary was good with high recovery ratio of over 90 per cent, the bank wanted to merge the housing finance activity in its own portfolio and then pursue housing finance in an aggressive manner.

The portfolio of Ind bank Housing is to the tune of Rs 110 crore. The bank is already disbursing housing loans under its umbrella and sanctioned around Rs 140 crore during last fiscal.

NHB chairman and managing director P P Vora said: "After a few rounds of discussions, NHB has taken note of the fact that Indian Bank does not want to run Ind Bank as a subsidiary. NHB has given Indian Bank the approval to takeover the assets and liabilities of the housing subsidiary. We do not have any opposition to the takeover."

Indian Bank chairperson and managing director Ranjana Kumar could not be contacted. Bank executives, however, confirmed the development.

Indian Bank had earlier submitted a proposal with the NHB to allow takeover of the assets and liabilities of the housing finance subsidiary because it did not want to run it as a housing finance company.

Indian Bank had to take permission of the NHB because Ind Bank is a registered housing company with the NHB which is the regulator of housing finance in India.

Also, since Ind Bank had taken refinance to the tune of Rs 44 crore from the regulator, the amount would have to be repaid to the NHB before the final takeover takes place.

In response to an earlier questionnaire, Ranjana Kumar had said: "As a part of the restructuring plan for the bank in accordance with the direction from the government and the Reserve Bank of India, it was decided to hive off the loss-making subsidiary. It has, therefore, proposed to takeover the assets and liabilities of the company."

She added that the subsidiary company had acquired deposits from the public for longer period at higher rate of interest necessitating servicing of deposits at higher costs. As a result, sanction of housing loans at competitive rates is not found feasible with the added burden of non-performing assets.

She said that this will not affect the interest of the housing finance system as Indian Bank, with a large network of branches and with adequate exposure and expertise in the housing finance segment, will continue to serve and secure the interest of the present prospective customers of the subsidiary company.

Ind Bank was incorporated in January 1991 and has a network of 12 branches. During the initial years of operation, the company had performed well and declared dividends up to March 1995. However, due to a change in money market conditions, the financial sector witnessed a downward trend.