The Hindu Business Line : LIC Housing Fin to launch deposit scheme

For the first time, the company is coming out with a public deposit scheme with a view to lowering its average cost of funds. Second, the company intends to focus more on the higher-margin project business, as opposed to giving home loans to individuals.

At a press conference here on Saturday, the LIC Housing Finance's Director and Chief Executive Officer, Mr S.K. Mitter, said that the company's average cost of funds was 7.6 per cent against an average yield on advances of 8.8 per cent, leaving a thin spread.

Public deposits

Public deposits, he said, would increase the spread to some extent. Also, around 85 per cent of the company's advance book of Rs 15,000 crore was made up of `retail' loans. Spreads in loans given for large project constructions could be around 2.5 percentage point, Mr Mitter said.

Today, the company's outstanding loans to the `project sector' are about Rs 680 crore. Mr Mitter said that he would like to raise this to Rs 1,200 crore this year.

Asked why LIC Housing had not come out with a public deposits scheme earlier, he said that when margins were better the company had not thought it necessary.

LIC Housing Finance Ltd is the fourth largest housing finance company in terms of loan book, after ICICI Bank, HDFC and State Bank of India. It has around 7 per cent share of Rs 1,65,000-crore housing loan market.

Target set

Life Insurance Corporation of India has a 39 per cent stake in the company and FIIs hold 35 per cent. Mr Mitter said that the company had set itself a target of Rs 8,200 crore for loan sanctions and Rs 7,750 crore for disbursements.

Answering a question, he said that there was a need for a mortgage loan guarantee company. Earlier, the National Housing Bank announced in 2003 about the impending establishment of such a company. The company is yet to be set up. Asked about the NHB proposal, Mr Mitter said NHB was still working on it. "NHB has not shelved it," he said.

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