The Hindu Business Line : LIC agrees to cut lending rates to home finance arm

Speaking to presspersons here on Saturday, Mr S.C. Jain, Chief Executive of LIC Housing, said the parent had agreed to reduce the lending rates to it by 275 basis points. Of this, 250 basis points reduction would be retro effective from December 2002 and the remaining 25 basis points would be effective from this April onwards, he added.

LIC provides 62 per cent of the funding support for the home finance subsidiary, where it holds a 38 per cent stake. Mr Jain said that this reduction would in turn be passed on to the borrowers this year. Further, he added that LIC Housing had done Rs 550-crore swap in tranches linked to the Mumbai Interbank Borrowing Rate and the Mumbai Interbank offered Rate in a bid to reduce the cost of funds.

The fixed cost loans were swapped into floating rate loans, which would also bring down the cost of lending resources. The costs were brought down to about 7.4 per cent.

In addition, $50 million was raised through the external commercial bank (ECB) route at about four per cent inclusive of the five-year hedging costs. He said that LIC Housing was able to show the highest growth rate in disbursements and sanctions, which were 70 per cent and 62 per cent, respectively. This was higher than the industry average of 30 per cent.

The company planned to increase disbursements by 50 per cent.

Already during the first two months of the current financial year, it had managed to show a growth of 90 per cent.

Referring to the last financial year's performance, he said the board had recommended a dividend of 55 per cent, on the basis of a profit of Rs 180.11 crore in 2002-03 as against Rs 147.66 in the previous year.

Disbursements during last year were Rs 3,190 crore and sanctions Rs 3,593.45 crore.

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