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Tuesday, Aug 13, 2002

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Pass through certificates may get listed on NSE

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MUMBAI, Aug. 12

PASS through certificates (PTCs) of mortgage-backed securities, may soon be listed on the National Stock Exchange.

The National Housing Bank is working on a plan that is expected to integrate the housing finance sector with the capital market where the PTCs will act as a conduit for this process, said Mr R.V. Verma, Executive Director, NHB.

When mortgaged securities are sold by the issuer to the special purpose vehicle or trust, the latter issues a PTC when the issue is subscribed to be the investor.

According to Mr Verma, NHB is in the process of bringing the PTCs into a demat form. Currently, PTCs though a transferable instrument, is not being traded in the secondary markets.

Traders in the debt market said that though attempts had been made to make the PTC tradable privately, it had not been very successful. "Unlike a debenture or CP, there has not been much trading for PTCs in the secondary market, mainly because of the lack of awareness of Mortgaged Based Securities (MBS) as a product,'' said one dealer.

The recent announcements in the Monetary and Credit Policy of the RBI had reduced the risk weightage to be assigned to individual housing loans by banks to 50 per cent from 100 per cent.

The Credit Policy had also provided that investments in MBS of residential assets of housing finance companies (HFCs) would be eligible for risk weight of 50 per cent for the purpose of capital adequacy from the existing 100 per cent.

So far, NHB has raised around Rs 750 crore through MBS and plans to raise a further Rs 1,000 crore this fiscal.

Said Mr Verma, "Citibank is planning to raise around Rs 150 crore through MBS shortly. This would be the first bank raising funds through the MBS route.''

However, the RBI had not clarified in the Credit Policy if the MBS raised by banks would be eligible to 50 per cent risk weightage. NHB will be seeking clarifications from the RBI on this front, said Mr Verma.

Other than Citibank, a slew of MBS is expected to hit the market from housing finance companies (HFCs) such as PNB Housing Finance, BoB Housing Finance and Dewan Housing Finance.

"So far, all the MBS issued through us have been rated `AAA' papers. Any lesser paper may have its own weakness and hence we are not keen on issuing those papers that are not `AAA' rated. The MBS market is not developed enough for this,'' said Mr Verma.

He said that despite the slowdown, the housing sector had registered a strong growth and this in turn had impacted other sectors, though in a limited manner.

In the year 2000-01, commercial banks had housing loan portfolio of Rs 20,000 crore, HFCs had a loan book of Rs 15,000-17,000 crore, while the co-operative sector had a portfolio of around Rs 6,000 crore amounting to around Rs 40,000 crore totally.

During the year 2001-02, HFCs had registered a 27 per cent growth in housing finance, while banks had registered a 35-40 per cent growth in their housing loan portfolios.

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