NHB - PROMOTING
A SOUND, HEALTHY,
VIABLE AND EFFICIENT
HOUSING FINANCE SYSTEM
By P P Vora,
Chairman & Managing Director, National Housing Bank
The National Housing
Bank (NHB) was set up in July 1998, under an Act of the Parliament. As
a wholly owned subsidiary of the Reserve Bank of India with the principal
mandate to promote a sound, healthy, viable and efficient housing finance
system to cater to all segments of the population. The Bank has also been
entrusted with the responsibility of regulating and supervising the housing
finance institutions and in particular, to protect the depositor's interest.
The Bank also extends refinance assistance to approved institutions for
the purpose. The scheduled public sector and co-operative banks, housing
finance companies and state level apex co-operative housing federations
complying with the norms laid down for this purpose are all eligible to
avail refinance assistance. The financial highlights of the performance
of NHB are provided in the table.
Some significant developments
that took place concerning activities of NHB during the year are discussed
below.
During the year, the
National Housing Bank Act was comprehensively amended through the National
Housing Bank (Amendment) Act, 2000 and the amendments have come into force
with effect from June 12, 2000. One of the important features of this amendment
is that all housing finance companies having a net owned fund of Rs. 25
lakhs and above are required to compulsorily register with NHB for commencement
or carrying on the business of housing finance. Further, where a housing
finance company has failed to repay any deposit, officer of the NHB authorised
in this behalf by the Central Government, will have the power to order
repayment of such deposits and penalty proceedings can be initiated against
a company, if it fails to carry out the said order. The depositors of housing
finance companies will now have the facility of nomination on the lines
available to the depositors of scheduled banks.
A new chapter has been
added to the National Housing Bank Act, 1987 through this amendment to
provide for introduction of a speedier recovery mechanism. As per this,
officers of approved institutions can be appointed as recovery officers
and they can promulgate and enforce orders for the recovery of dues. The
framing of rules for this purpose is currently in progress and as and when
these rules are notified, this will come into force.
The amendments have also
paved the way for NHB taking up additional activities to mobilise funds
for housing through the secondary market as well as for lending. NHB can
now purchase, sell or deal otherwise in any loans or advances secured by
mortgage or charge on the immovable property relating to scheduled banks
or housing finance institutions. NHB has also been allowed to create trusts
and to act as trustees. Emanating from this provision, NHB launched the
first pilot issue of mortgaged-backed securities recently.
The country's first mortgage
backed securitisation deal was successfully placed in the market with National
Housing Bank (NHB) acting as Issuer and Trustee to the proposed Special
Purpose Vehicle (SPV) Trust. The deal size was Rs. 103.54 crore comprising
11,106 individual housing loans originated from Housing Development and
Finance Corporation Ltd. (HDFC) and LIC Housing finance Ltd. (LICHFL) in
two separate branches for HDFC and LICHFL individually. The issue was marketed
on book building basis and closed on August 29, 2000, fully subscribed
at 11.85%. The issue received good response from a wide range of institutional
investors including Insurance Companies, Mutual Funds, Financial Institutions,
and Commercial Banks. This issue of MBS is the first of its kind to be
introduced in India and is a prelude to the development of a Secondary
Mortgage Market (SMM) in the country.
This transaction involves
the assignment of retail housing loans from the HFCs to NHB. The individual
loans, repayable in EMIs, will then be packaged and offered to the investors
by way of securities in the form of Pass Through Certificates sans recourse
to the issuer. The issue proceeds will be used by NHB to pay the HFC the
part consideration for the receivables purchased. Under the transaction
NHB will make an express Declaration of Trust (SPV Trust) in respect of
receivables, appoint itself as sole Trustee and will hold and administer
the receivables as Trust property for the benefit of PTC holders. The SPV
Trust will rely only upon collections against the receivables and the credit
enhancement specified in this Information Memorandum for making payments
on the PTCs. The HFC, which has originated the housing loans, will continue
to administer them even after securitisation, in its capacity as Servicing
and Paying (S&P) Agent.
Rural Housing
In order to make available
institutional finance for housing in the rural areas, NHB had launched
the Golden Jubilee Rural Housing Finance Scheme during the year 1997-98.
The target given under the scheme had been successfully achieved over the
years. The target for the year 2000-2001 has been fixed at financing 1,50,000
dwelling units. The performance under this scheme is given in the table
below:
Golden Jubilee Rural
Housing Finance Scheme
(Number of units)
| |
1997-98
|
1998-99
|
1999-2000
|
2000-2001
|
| Target |
50,000 |
1,00,000 |
1,25,000 |
1,50,000 |
| Achievement |
51,272 |
1,23,518 |
1,41,363 |
58,669* |
*Provisional
upto September 30, 2000
Performance
of NHB during the last five years is given in the table.
(Amount in Rs. crores)
| |
1995-96 |
1996-97 |
1997-98 |
1998-1999 |
1999-2000 |
Share
Capital
|
300.00
|
300.00
|
350.00
|
350.00
|
350.00
|
|
Reserves
|
285.00
|
371.43
|
425.00
|
480.77
|
565.70
|
|
Outstanding
Loans &
Advances
|
2060.10
|
2334.74
|
2641.26
|
3176.92
|
3738.92
|
|
Income
|
293.17
|
357.30
|
422.07
|
478.40
|
566.84
|
|
Net Profit
|
52.55
|
86.49
|
53.18
|
58.52
|
83.69
|
|
Refinance Disbursed
|
333.05
|
445.35
|
524.15
|
747.01
|
841.68
|
Cumulative
Refinance
Disbursed
|
2657.49
|
3102.84
|
3626.99
|
4374.00
|
5215.68
|
Direct
Lending
|
|
11.83
|
8.83
|
15.97
|
50.50
|
No. of HFCs
Approved for
Refinance Support
|
21
|
25
|
26
|
29
|
29
|
|
Staff Strength
|
63
|
68
|
77
|
83
|
79
|