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In a move that will help home loan companies that wish to securitise their home loan receivables, the India Mortgage Guarantee Corporation (IMGC) will offer to provide guarantees that can substitute cash collaterals. Thereby, the lenders would not have to lock-up their cash in collaterals when they look for credit enhancement; IMGC’s guarantees will do the job of the cash collaterals, the company’s CEO, Mahesh Misra, told journalists here today.
IMGC is in the business of providing first-loss loan default guarantee to home loan companies, and is the only Indian mortgage guarantee company. The company was promoted in 2012 by the National Housing Bank—which, incidentally, is looking to sell off its 12 per cent stake to the other investors, viz., Enact MI, Sagen, IFC and ADB. IMGC typically guarantees the first 20 per cent of the default. NHB is waiting for RBI’s approval for exiting IMGC, having done its job of promoting and stabilising the business.
Misra said that IMGC has provided guarantees, substituting cash collaterals, in a few securitisation transactions, but would do more in the coming years.
In 2022-23, IMGC has crossed the milestone of standing guarantee for home loans worth ₹20,000 crore, for over 100,000 borrowers, though its customers are the lenders. Its current list of partner-lenders includes marquee names such as LIC Housing Finance, SBI Home Loans, HDFC Home Loans, Muthoot Finance, Shriram Housing Finance, Axis Bank and Federal Bank.
These lenders give the option of taking the guarantee to the borrowers; the fee in the hands of the borrowers typically works out to ₹17 per ₹1 lakh, Misra said. IMGC typically charges 1.25 per cent of the loans it guarantees.
With a capital base of ₹400 crore, the company boasts of a capital adequacy ratio of 38 per cent. For the first time since inception, the company made a net profit in 2022-23, Misra said.
Average loan size
Misra said that the average size of the loans that IMGC guarantees is about ₹19 lakh — down from ₹26 lakh a few years ago.
He said that IMGC’s business would only grow because the ‘outstanding mortgage loans to GDP ratio’ in India works out to 10 per cent, much lower than in most other countries.
Asked if IMGC would come out with an IPO, he said that while the proposal “is not off the table”, the IPO would not happen any time soon.
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