To encourage low-cost housing in rural areas and small towns, the National Housing Bank is planning to give refinance to 15 more regional rural banks in 2012-13.
In the last couple of years, 19 RRBs have tapped NHB for refinance against home loans disbursed by them.
According to the Chairman and Managing Director of NHB, Mr R. V. Verma, the capacity building initiatives launched by NHB have led to 19 RRBs collectively building up a home loan portfolio of about Rs 500 crore.
The capacity building exercise entails organising seminars/conferences to sensitise RRB staff about home loans and explaining the mechanics of refinance to the management.
RRBs are jointly owned by the Central Government (50 per cent stake), State Government (15 per cent) and sponsor banks (35 per cent).
There are 82 RRBs across the country. As on March-end 2011, the RRBs collectively had deposits and advances aggregating Rs 1,66,232 crore and 98,917 crore, respectively.
NHB is the regulator and supervisor of housing finance companies (HFCs) and provides refinance to primary lending institutions — banks and HFCs.
Mr Verma observed that RRBs, with their network of 16,000 branches spread across 620 districts, would be major purveyors of credit for low-cost housing in smaller centres — taluka/block level and rural areas in the next two-three years.
Distribution channel
“RRBs are proving to be a very good distribution channel for home loans. They need long-term funding. But their risk taking ability is limited. So, we need to support them through long-term finance at concessional rates. We are totally behind them and we are going to ensure that they scale up their operations (home loans),” said the NHB chief.
Earlier, RRBs were not enthusiastic about home loans as they faced asset-liability mismatches, that is, while home loans (assets for the bank) have an average tenor of 15-20 years, the deposits (liabilities) have an average maturity of 2-3 years. By resorting to refinance, this mismatch is taken care of.
End-users
Emphasising the importance of RRBs as a distribution channel for providing loans for low-cost housing, Mr Verma said borrowers of these banks are normally end-users and not investors. Their average home loan requirement is in the Rs 5-6 lakhs range or so. This fits with NHB’s strategy and vision of encouraging low-cost housing.
NHB’s keenness to step up refinance to RRBs stems from the fact that the home loans they provide go to borrowers who are unlikely to default as it is a once in a lifetime opportunity for them to own a home.